Why do market analysts employ price multiples

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Why do market analysts employ price multiples (e.g., price/earnings, price/book, etc.) in their valuation work? Besides the obvious, what does a price/earnings multiple of 18 versus a price/earnings multiple of 10 financially suggest? What does a price/book of 3 suggest? Conceptually, would you ever purchase a stock with a price/book of 3?

Reference no: EM132068581

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