5.21 - Price/Earnings Ratio

This ratio is used to learn what investors are currently willing to pay for the company's earnings.The Price/Earnings Ratio is one of the most widely used measures of stock value.It shows the relationship between the current stock price and the company's per share of stock.The higher the Price/Earnings Ratio, the more the market is willing to pay for a company's earnings.Some investors believe a high P/E indicates an overpriced stock.This may be true but it may also mean the market is optimistic about the stock's future and is willing to pay more for the stock.A low Price/Earnings Ratio might suggest "no confidence" for the stock or it could mean the price is undervalued and may rise in the future.Some "undervalued" stocks have become big winners for some investors.Please note there is a strong emphasis on the word "some".

Enter the amounts, for all three periods, for the current price of your company's common stock.Also enter Earnings Per Share from your company's Income Statement.For each period, calculate the Price/Earnings Ratio using the following formula.

Current Stock Price Earnings Per Share

Enter the amounts in dollars from the SEC Form 10K, for the current year, the previous year and the next previous year.Describe the trend direction for the Price/Earnings Ratio. Use phrases like: up only this year but level in previous years, consistently up, down only this year, consistently down or level for all years.Also, in your opinion is the trend positive, negative, insignificant?

Last, in your opinion, explain why the Price/Earnings Ratio for your company's stock is or is not adequate for its future.

Question 5.21 - Price/Earnings Ratio

Accounts

a= Current Yr

b= Previous Yr

c=Next Previous Yr

d=Industry Ratio

A

Stock Price

a= $45.8

b=$45.7

c=45.6

B

Earnings Per Share

a= $ 0.29

b=$ 1.51

c=$ 1.69

C

Price/Earnings Ratio

a= 157.93

b=30.26

c=26.98

d=71.71

D

Why is or is not the Price/Earnings Ratio adequate for your company's stock?

E

Price/Earnings Ratio trend description