Determine whether a firm's price-earnings (PE) and price-sales (PS) ratios can explain the firm's stock performance over the past year. Firm Return PE PS 4.6 14.39 2.4 A PE ratio is calculated as a firm's share price 2 -4.7 11.01 0.81 compared to the income or profit earned by the firm per 3 15.8 11.97 2.27 share. 5.1 11.26 1.33 -11.2 9.84 1.81 20.5 15.66 J.8 High PE ratio= investors are expecting higher earnings 64.4 16.09 1.65 growth in the future 8 18.8 9 1.04 9 -15.5 11.36 2.76 10 48.3 13.73 1.43 The price-sales (PS) ratio is calculated by dividing a 11 7.2 11.46 1.23 firm's share price by the firm's revenue per share for 12 20.9 14.35 1.28 13 -18.1 8.21 0.84 the trailing 12 months. 14 19.49 2.68 15 12.2 11.18 1.95 Investors can use the PS ratio to determine how much 16 -4 12.62 2.77 17 2 9.71 2.01 they are paying for a dollar of the firm's sales rather 18 15.8 13.49 1.15 than a dollar of its earnings (PE ratio). 19 23.3 15 3.33 20 -1.4 8.97 2.37 21 -8.2 10.55 3.74 The lower the PS ratio, the more attractive the 22 -3.7 7.91 2.24 investment. 23 15.8 16.37 4.58 24 21.4 16.3 10.89 25 6.3 15.03 2.35 The accompanying table shows a portion of the 26 11.9 9.17 0.97 year-to-date returns (Return in %) and the PE and PS 27 13.2 14.95 1.4 28 15.7 15.57 0.94 ratios for 30 firms. 29 0.7 12.62 0.49 a-1. Estimate: Predicted Return = 30 16.3 13.96 1.93 Bo + PIPE + B2PS + E. (-Negative value. Do not round intermediate calculations. Round final answer to 2 decimal places.) Predicted Return + = 3.97 PE + PS