# 2 firms' P/E ratios

was the answer that the one with the higher P/E was overvalued

you are not remembering it correctly, it was about P/B, firm compared to industry

the show NY Wrote: ------------------------------------------------------- > was the answer that the one with the higher P/E > was overvalued you told me you will no go on AF anymore, yes higher P/E means overvalued

oh was that it? one firm had higher P/B than industry and you had to recognize that that firm is overvalued?

P/E ratio question was about 3 firms, market P/E were given , you had to calculate justified P/E and compare largest % DIFFERENCE

i remember that Q now i think. there was a chart with market P/E, dividend payout ratio, required return on equity, and g. i found all 3. is the largest ratio the one that was most overvalued? u said before they asked about p/bv but now youre saying they asking about p/e

The one that is overvalued is the one where market P/E was greater then justified P/E. For me that turned out to be the A I believe.

It was stock C. It had an actual P/E of 9 and the justified P/E turned out to be 8. The gap of 1.0 was the largest of the three gaps.

Yes, even though market PE ratios were provided, we were required to compare based on Justified PE ratios (since growth rates for the firms were different, market PE ratios will not give an accurate comparison). I think the answer was stock C (agree with the post above)

wow, i must have skipped a beat or two. I dont have a clue what you guys are talking about.

my mind just skipped on that question and I used PEG instead.

i dont remember them asking about the differences, just which was overvalued. i found the intrinsic ratios of all 3 and then said that the one with the largest ratio was overvalued. would this be wrong?

You had to be careful whether you were using the formula for leading or lagging P/E. Can’t recall what data was provided. I believe we were using leading P/E since they gave forecasted earnings.

Hey GordGekko, I heard they’re coming out with a new Wall Street movie. Michael Douglas is gonna be in it too. Not sure if it’s a remake or a sequal but I just thought you might wanna know lol.

i agree. i think i looked out for that and did not multiple the numeator by 1 +g. with that said, did u have to find the differences between intrinsic and market p/e? or just which of the 3 inrinsic p/e was highest

one with the greatest % difference between the given P/E and calculated P/W was most overvalued and it was C, we already beat this to death, now people are coming out of woodwork.