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

Asset-backed securities, Introduction When financial assets...

Introduction When financial assets or bonds are pooled together and offered to the investors for receiving the inflow of funds from these underlying

Sources of Finance, A regional division of a water company is upgrading its...

A regional division of a water company is upgrading its water filtration & purification plant; the new system is expected to last 20 years & to cost $40m. The parent company has ha

Ranking conflict net present value & internal rate of return, Explain how t...

Explain how to resolve a "ranking conflict" between the net present value and the internal rate of return.  Why should the conflict be resolved as you explained? Whenever there

Enhance or maintain its image and reputation, a) Marketing might be vital t...

a) Marketing might be vital to an organisation such as WHSG for several reasons, including: • The need to be a focus for the right kind of students to the school (there are riva

Pvif, how do we get the pvif of a perpetuity

how do we get the pvif of a perpetuity

Evaluate accounting rate of return and net present value, Citilink has a bu...

Citilink has a business line currently owns and runs 350 sightseeing buses and has a turnover of $10 million per annum. The current system for allocating jobs to drivers is very i

#WALTOR''S MODEL., CAPITALISATION RATE=0.01 EARNINGS PER SHARE(E)=10 ASSUME...

CAPITALISATION RATE=0.01 EARNINGS PER SHARE(E)=10 ASSUME RATE OF RETURNS ON INVESTMENTS (R):15

International strategic management, undertake a critical review of the curr...

undertake a critical review of the current academic literature to determine the reasons for benefits of and the costs to companies of cross listing.

Analyse interest rate swap and currency swap, Problem: (a) Critically ...

Problem: (a) Critically analyse interest rate swap and currency swap. (b) Explain why a bank may face credit risk when it enters into offsetting swap contracts. (c) Two

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