Question
Company A has a P/E ratio of 12.4 while company B has a P/E ratio of 38.6. Both companies reported that this quarter's earnings per
Company A has a P/E ratio of 12.4 while company B has a P/E ratio of 38.6. Both companies reported that this quarter's earnings per share was 50 cents more than projected. According to the Gordon formula,
company A has a lower expected growth rate than company B and company A's stock price should change more than that of company B's. | ||
company A has a lower expected growth rate than company B and company A's stock price should change less than that of company B's. | ||
company A has a higher expected growth rate than company B and company A's stock price should change less than that of company B's. | ||
company A has a higher expected growth rate than company B and company A's stock price should change more than that of company B's.
whats the correct answer and why? |
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