help me please
Based on the following information, choose all responses which are correct.
You are researching the valuation of the stock of a company in the food-processing industry. Suppose you intend to use the mean value of the forward P/Es for the food-processing industry stocks as the benchmark value of the multiple. This mean P/E is 18.0. The forward or expected EPS for the next year for the stock you are studying is $2.00. You calculate 18.0 $2.00 = $36, which you take to be the intrinsic value of the stock based only on the information given here. Comparing $36 with the stocks current market price of $30, you conclude the stock is undervalued.
Your conclusion may be in error because if the peer-group stocks are themselves overvalued, the mean P/E of 18 may be too high to use in valuing the stock.
Your conclusion may be in error because if the mean P/E is influenced by outliers.
Your conclusion may be in error because the stocks fundamentals may differ from those of the peer-group stocks.
Your conclusion may be in error because, comparing $30 to $36, you could plausibly conclude the stock is overvalued.
Your conclusion may be in error because if the stocks expected growth rate is lower than the mean industry growth rate, then the stock may deserve a higher P/E than the industry mean.
Your conclusion may be in error because if the stocks risk is higher than the mean for the peer-group stocks, then the stock may deserve a higher P/E than the industry mean.
Your conclusion may be in error because if the stocks expected growth rate is lower than the mean industry growth rate, then the stock may deserve a lower P/E than the industry mean.
Your conclusion may be in error because if the stocks risk is higher than the mean for the peer-group stocks, then the stock may deserve a lower P/E than the industry mean.
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2.Based on the following information, choose all responses which are correct. Negative values are shown in parentheses, like this: Negative 1.23 = (1.23)
An analyst plans to use P/E and the method of comparables as a basis for recommending purchasing shares of one of two peer-group companies in the business of manufacturing personal digital assistants. Neither company has been profitable to date, and neither is expected to have positive EPS over the next year. Data on the companies prices, trailing EPS, and expected growth rates in sales (five-year compounded rates) are given in the following table:
| Company | Price | Trailing EPS | P/E | Expected Growth (Sales) |
| Hand | $22 | ($2.20) | N/A | 45% |
| Somersault | $10 | ($1.25) | N/A | 40% |
Because the earnings for both companies have been negative, their P/Es based on trailing EPS are not meaningful in this case.
The analyst can rank the two stocks by earnings yield (E/P) instead of P/E.
Whether EPS is positive or negative, a lower E/P reflects a richer (higher) valuation.
A higher earnings yield has an interpretation that is similar to that of a lower P/E.
Somersault has an E/P of (0.125).
A ranking from high to low E/P has a meaningful interpretation.
Hand has an E/P of (0.100).
Hand has a higher expected sales growth rate than Somersault.
Because next years earnings are expected to be negative, Forward P/E is not meaningful in this case.
Hand appears to be relatively undervalued because its earnings yield is higher (i.e., less negative) than Somersault's.
The analyst should recommend Hand instead of Somersault.
The difference in earnings yield in this case cannot be explained by differences in sales growth forecasts.
Based on the following information, choose all respanses which are correct, Negative walues are shown in parentheses. Mike this Nesative 1.23 (1.23) An analyst plans to use P/E and the method of comparables as a basis for recommending purchasing shares of one of two peer-group companies in the business of manufacturinit personal digital assistants. Neither company has been prohitable to date, and neither is expected to have positive EPS over the next year. Oata on the companies' prices, trailing Because the earnings for both companies have been negative. their P/Es based on trailing EPS are not meanitgful in this case. The analyst can rank the two stocks by earnings yleld (E/P) instead of P/E. Whether EPS is positive or negative, a lower E/P reflects a richer (higher) valuation. A higher earnings yield has an interpretation that is similar to that of a lower PVE. Somersault has an E/P of (0.125). A ranking from high to low E/P has a meaningful interpretation. Hand has an E/P of (0.100). Hand has a higher expected sales growthrate than Somersault. Because next year's earnings are expected to be negative, Forward P/E is not meaningful in this case- Hand appears to be relatively undervalued because its earnings yield is higher fiee., less negative) than Somersault's. The analyst should recommend Hand instead of Somersault. The difference in earnings yield in this case cannot be explained by differences in sales growth forecasts: Based on the following information, choose all responses which are correct. You are researching the valuation of the stock of a company in the food-processing industry. Suppose you intend to use the mean value of the forward P.Es for the food. You calculate 18.052.00=$36. Which you take to be the intrinsic value of the stock based only on the informationglven here. Comparing 536 mith the stock't current nurke price of $30, you conclude the stock is undervalued. Your conclusion may be in error because if the peer-group stocks are themselves overvalued, the mean PYE af 18 may be too hich to use in valuing ithe atock. Your conclusion may be in error because if the mean P/E is influenced by outliers. Your conclusion may be in error because the stock's fundamentals may differ from those of the peer-aroup stocks: Your conclusion may be in error because, comparing $30 to $36, you could plaus ibly conclude the stock is overvalued. Your conclusion may be in error because if the stock's expected growth rate is lower than the mean industry growth rate, then the stock may deserve a higher fiE than the industry mean. Your conclusion may be in error because if the stock's risk is higher than the mean for the peer group stocks, then the stock may deserve a higher pyE than the industry mean. Your conclusion may be in error because if the stock's expected growth rate is lower than the mean industry growth rate, then the stock may deserve a lower PE than the industry mean. Your conclusion may be in error because if the stock's risk is higher than the mean for the peer-group stocks, then the stock mav deserve a lower Pi E than the irdustry mean. Based on the following information, choose all respanses which are correct, Negative walues are shown in parentheses. Mike this Nesative 1.23 (1.23) An analyst plans to use P/E and the method of comparables as a basis for recommending purchasing shares of one of two peer-group companies in the business of manufacturinit personal digital assistants. Neither company has been prohitable to date, and neither is expected to have positive EPS over the next year. Oata on the companies' prices, trailing Because the earnings for both companies have been negative. their P/Es based on trailing EPS are not meanitgful in this case. The analyst can rank the two stocks by earnings yleld (E/P) instead of P/E. Whether EPS is positive or negative, a lower E/P reflects a richer (higher) valuation. A higher earnings yield has an interpretation that is similar to that of a lower PVE. Somersault has an E/P of (0.125). A ranking from high to low E/P has a meaningful interpretation. Hand has an E/P of (0.100). Hand has a higher expected sales growthrate than Somersault. Because next year's earnings are expected to be negative, Forward P/E is not meaningful in this case- Hand appears to be relatively undervalued because its earnings yield is higher fiee., less negative) than Somersault's. The analyst should recommend Hand instead of Somersault. The difference in earnings yield in this case cannot be explained by differences in sales growth forecasts: Based on the following information, choose all responses which are correct. You are researching the valuation of the stock of a company in the food-processing industry. Suppose you intend to use the mean value of the forward P.Es for the food. You calculate 18.052.00=$36. Which you take to be the intrinsic value of the stock based only on the informationglven here. Comparing 536 mith the stock't current nurke price of $30, you conclude the stock is undervalued. Your conclusion may be in error because if the peer-group stocks are themselves overvalued, the mean PYE af 18 may be too hich to use in valuing ithe atock. Your conclusion may be in error because if the mean P/E is influenced by outliers. Your conclusion may be in error because the stock's fundamentals may differ from those of the peer-aroup stocks: Your conclusion may be in error because, comparing $30 to $36, you could plaus ibly conclude the stock is overvalued. Your conclusion may be in error because if the stock's expected growth rate is lower than the mean industry growth rate, then the stock may deserve a higher fiE than the industry mean. Your conclusion may be in error because if the stock's risk is higher than the mean for the peer group stocks, then the stock may deserve a higher pyE than the industry mean. Your conclusion may be in error because if the stock's expected growth rate is lower than the mean industry growth rate, then the stock may deserve a lower PE than the industry mean. Your conclusion may be in error because if the stock's risk is higher than the mean for the peer-group stocks, then the stock mav deserve a lower Pi E than the irdustry mean
