This is partial question from Schweser “Sample Exams” book, Exam 1, AM, #95 V Inc’s operations are located in emerging markets with high degree of political and regulatory risk. However, the TV, radio and internet operations have potential for extraordinary returns. V Inc’s stock is trading at 30 times next year’s earnings and five times book value. Is V Inc a speculative stock or speculative company? The answer is that it’s a speculative company. But someone tell me why it’s not a speculative stock? And what does “V Inc’s stock is trading at 30 times next year’s earnings and five times book value” tell you?
that it is valued as a growth stock -lots of opportunities available -no speculation on that front
the other questions I have seen that deal with “speculative stocks” all have negative earnings or a much higher P/BV. They are basically telling you the company is profitable with a low-ish P/BV, so it would be a growth stock.
I’d say it’s a speculative stock. Priced too high. High chance of losing money, small chance of making tons of money.