Question
You are examining two companies. Company A is trading at $50 per share and will make $4 in profit in the coming year. Company B
You are examining two companies. Company A is trading at $50 per share and will make $4 in profit in the coming year. Company B is trading at $75 per share and will make $5 in profit in the coming year. Which of the following statements could you conclude is correct from this information?
a) Company A is the better value because its shares are only $50.
b) Company B will make higher total profit in the coming year than Company A.
c) Company A is the better company to buy because its price earnings multiple is lower than Company Bs.
d) Company Bs price-earnings multiple is higher than Company As price-earnings multiple.
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