The following were the P/E ratios of firms in the aerospace/defense industry at the end of December 1993, with additional data on expected growth and risk. The risk-free rate in the US at the end of 1993 is 7.5 percent and the US market risk premium is 5.5 percent.

Company	P/E ratio	Expected growth	Beta	Dividend payout ratio
Boeing	17.3	3.5%	1.10	28%
General Dynamics	15.5	11.5%	1.25	40%
GM - Hughes	16.5	13.0%	0.85	41%
Grumman	11.4	10.5%	0.80	37%
Lockheed Corp.	10.2	9.5%	0.85	37%
Logicon	12.4	14.0%	0.85	11%
McDonnell Douglas	22.6	13.0%	1.15	37%
Northrop	9.5	9.0%	1.05	47%
Raytheon	12.1	9.5%	0.75	28%
Thiokol	8.7	5.5%	0.95	15%
Average	13.62	9.9%	0.96	32.1%

An analyst concludes that Thiokol is undervalued because its P/E ratio is lower than the industry average. The same analyst thinks that McDonnell Douglas is overvalued because its P/E ratio is high.

Question: Under what conditions are these statements true? Would you agree with these statements given the data in the table?