Define the p/e valuation method, Financial Management

Assignment Help:

Define the P/E valuation method. Under what circumstances should a stock be valued using this method?

The P/E ratio specifies how much investors are willing to pay for each dollar of a stock's earnings.  A high P/E ratio specifies that investors believe the stock's earnings will enhance, or that the risk of the stock is little, or both.

Financial analysts habitually use a P/E model to calculate common stock value for businesses that aren't public.  First, analysts compare the P/E ratios of alike companies within an industry to determine an appropriate P/E ratio for companies in that industry.  Second, analysts calculate a suitable stock price for firms in the industry by multiplying each firm's earnings per share (EPS) by the industry average P/E ratio. 

 


Related Discussions:- Define the p/e valuation method

Certified public accountant, Certified Public Accountant (CPA) - ACCOUNTANT...

Certified Public Accountant (CPA) - ACCOUNTANT who has satisfied education, experience and examination requirements of her or his jurisdiction essential to be certified as a public

What are the benefits of traditional approach, What are the benefits of Tra...

What are the benefits of Traditional approach Traditional approach had a very narrow perception and was devoid of an integrated conceptual and analytical framework. It had pre

Define country’s economic well being enhanced, How is a country’s economic ...

How is a country’s economic well-being enhanced through free international trade in goods and services? As per to David Ricardo, with free international trade, it is mutually adv

Acquisition strategy, T he acquisition strategy The most important str...

T he acquisition strategy The most important strategic consideration is the size of the acquisition. The completion of smaller series should be considered in the beginning tha

What the term objective denotes- financial management, What the term object...

What the term objectives denotes- financial management It must be noted at the outset that term 'objective' is used in the sense of a goal or decision criterion for three decis

Financial accounting, Financial accounting: Financial accounting attemp...

Financial accounting: Financial accounting attempts to establish the value of a particular organisation at a specific point in time, and its earnings over a specified period of

Treasury coupon securities and bills, Many practitioners feel that in...

Many practitioners feel that instead of using only on-the-run issues, all treasury coupon securities and bills are to be used for constructing the theoretical spo

Foreign exchange markets, At current interest rates and exchange rates...

At current interest rates and exchange rates, the US might have a $400 billion net financial (capital) account inflow from the rest of the world during 2010, and the

Barriers of shrm implementation, Q. Barriers of SHRM Implementation? Ba...

Q. Barriers of SHRM Implementation? Barriers of SHRM: barriers to successful SHRM implementation are complex. The main reason is a lack of growth strategy or failure to impleme

Describe the value maximisation criterion, Describe the value maximisation ...

Describe the value maximisation criterion In applying the value maximisation criterion, term value is used in terms of worth to the owners, which is, ordinary shareholders. Cap

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd