Question

Companies A and B each reported the same EPS, but Company A's stock trades at a higher price. Which of the following statements is CORRECT? Company A trades at a higher P/E ratio. Company A probably has fewer growth opportunities. Company B trades at a higher P/E ratio.

Answer 1

Answer:

a. Company A trades at a higher Price to Earnings ratio.

Explanation:

"The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple."

Reference: Hayes, Adam. “What the Price-to-Earnings Ratio – P/E Ratio Tells Us.” Investopedia, Investopedia, 11 Oct. 2019