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consider the p/e ratios of the following companies: - company a: 5.34 -…

Question

consider the p/e ratios of the following companies:

  • company a: 5.34
  • company b: 3.33
  • company c: 7.90
  • company d: 6.75

which company has the lowest relative value among investors?

  • company c
  • company b
  • company d
  • company a

Explanation:

Step1: Recall P/E ratio meaning

P/E (Price - Earnings) ratio: A lower P/E ratio generally implies a lower relative value (cheaper) in terms of what investors pay for each unit of earnings.

Step2: Compare the P/E ratios

We have the P/E ratios:

  • Company A: \( 5.34 \)
  • Company B: \( 3.33 \)
  • Company C: \( 7.90 \)
  • Company D: \( 6.75 \)

Among these values, \( 3.33 \) (Company B's P/E ratio) is the lowest.

Answer:

B. Company B