ABC investment club wants to buy the stock of either TechSoft Inc. or A&E Corp. In this connection, HKBU s investment club prepared the following table. You have been asked to help them interpret the data, based on your forecast for a healthy economy and a strong stock market over the next 12 months.

TechSoft Inc. A&E Corp. S&P 500 Index

Current price $30 $32

Industry Computer software Capital goods

P/E ratio (current) 25 14 16

P/E ratio

(5-year average) 27 16 16

P/B ratio (current) 10 3 3

P/B ratio

(5-year average) 12 4 2

Beta 1.5 1.1 1.0

Dividend yield 0.3% 2.7% 2.8%

TechSoft's shares have higher priceearnings (P/E) and pricebook value (P/B' ratios than those of A&E Corp. (The pricebook ratio is the ratio of market value to book value.) Briefly discuss why the disparity in ratios may not indicate that TechSoft's shares are overvalued relative to the shares of A&E Corp. Answer question in terms of the two ratios and assume that there have been no extraordinary events affecting either company.