Isn’t it the other way around or i am missing something here.
Low company P/E means stock price is cheap & undervalued.
And yeah, its the other way around.
But the curriculum states if benchmark PE > Co PE then Co stock is overvalued
Can you cite where it says that? That’s wrong.
Agree with the above, it’s definitely the other way around (or I’m doing my job wrong!). Must be either a typo or a misread.
Discounted dividend valuation Reading - EOC# 9
You are reading the answer wrong. When it says ‘market trailing P/E’ here it is referring to the trailing P/E for the stock (not the overall market). Re-read the first sentence of the question to see what I mean.
Therefore it’s talking about the justified P/E being lower than the market implied trailing P/E for the stock, as such it is overvalued.