Question
You see a stock with a net income of 400 million and outstanding shares of 200 million. IF the PE multiple of the industry is
You see a stock with a net income of 400 million and outstanding shares of 200 million. IF the PE multiple of the industry is 13 what should you do if the stock is trading at $30 . You realize however that this stock is growing at twice the rate of the industry as they have a superior product offering and sales are soaring.
a. Do not buy as the PE of this stock is 15 which is higher than the industry average and thus too expensive.
b. Buy this stock as the PE multiple is lower than the industry average and is undervalued.
c. Buy this stock as even though the PE is 15% higher than its industry average, its large growth rate more than compensates and offers an attractive buy
d. Buy this stock as the PE is not only lower than the industry PE but has a higher growth rate as well.
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