You are considering purchasing shares of a firm that trades at 12 times earnings. The average PE ratio of your competitors is 9.5. Which of the following lists possible explanations?

Question 7 options:

Your firm may have better growth opportunities than the average competition, or may simply be overvalued.

Your firm may be mismanaged, or possibly has worse return on its investments, or may simply be overvalued.

Your firm may have better growth opportunities than the average competition, or may simply be undervalued.

Your firm may have better growth opportunities than the average competition, or may simply be undervalued.

None of the above answers are plausible.