Question
Investors often use the price earnings, or P/E ratio, as a way to gauge the relative value of a stock in relation to its peers.
Investors often use the price earnings, or P/E ratio, as a way to gauge the relative value of a stock in relation to its peers. It is the market price of a share of stock relative to its earnings per share. The more positive investors feel about a stocks future prospects, or the less risk they feel the stock has, the higher the stocks P/E ratio (Keown, 2013, p. 439). Other investors view a low P/E as a value, meaning the price paid for the stock is less relative to the earnings generated by the firm itself. Select four stocks of your choice that are diversified across four different sectors or industries. Research each stock by keying its ticker symbol or name at the landing page of finance.yahoo.com. Find the P/E ratio. Then click on the Competitors, and select a competitor firm, and view its P/E. Present this information in your post and label your selected stock as choice and the competitor stock as peer. Comment on your findings. Based on P/E, do you believe your choice stock to be fairly priced, a value, or overpriced as compared to a peer?
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