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

Show financial management process, Q. Show Financial Management Process? ...

Q. Show Financial Management Process? The financial management process begins with the financial planning and decisions. While implementing these decisions, the firm has to acq

Operating cycle, discuss an operating cycle of vegetable growing in Uganda

discuss an operating cycle of vegetable growing in Uganda

Explain about the term investment intermediaries, Explain about the term in...

Explain about the term investment intermediaries. Investment intermediaries: Investment intermediaries contain finance companies, mutual funds and investment banks and se

Binomial model, The option features embedded in many bonds and fixed-...

The option features embedded in many bonds and fixed-income securities have made the binomial interest rate tree approach a valuable model for pricing debt. Binomial

Standard deviation for every project, AOT limited is considering two mutual...

AOT limited is considering two mutually exclusive projects - cable and satellite.  The possible NPVs for every project and their associated probabilities are as follows: Cable:

Limitation of weighted average cost of the capital, Q. Limitation of weight...

Q. Limitation of weighted average cost of the capital? 1) Determine the Weight; the first and foremost difficulty in computing the average cost is to an easy job. This type of

Case Let 2, How would you judge the potential profit of Bajaj Electronics o...

How would you judge the potential profit of Bajaj Electronics on the first year of sales to booth Plastics and give your views to increase the profit?

Rate changes and duration estimate, To calculate duration, we need to...

To calculate duration, we need to first obtain the values for V - and V + where V - is the price when the yield decreases by certain number of basis points and V +

Calculate amount of first coupon payment your organization, Your firm has p...

Your firm has presently issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%.  What is the amount of first coupon payment your organization will pa

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