Question

Company XYZ closed at ​$53.21 per share with a​ P/E ratio of 13.26 . Answer the following questions. a. How much were earnings per​ share? b. Does the stock seem​ overpriced, How much were earnings per​ share? b. Does the stock seem​ overpriced, underpriced, or about right given that the historical​ P/E ratio is​ 12-14?ced, or about right given that the historical​ P/E ratio is​ 12-14?

Answer 1

Answer: a. To find the earnings per share (EPS), we can use the formula:

P/E ratio = Price per share / Earnings per share

Rearranging this formula to solve for EPS, we get:

Earnings per share = Price per share / P/E ratio

Substituting the given values, we have:

Earnings per share = $53.21/13.26 ≈ $4.01

Therefore, the earnings per share were approximately $4.01.

b. To determine if the stock is overpriced, underpriced, or about right given the historical P/E ratio of 12-14, we can compare the current P/E ratio to this range. Since the current P/E ratio is 13.26, which falls within the historical range, the stock seems to be about right in terms of valuation. However, it's important to note that other factors should also be considered before making any investment decisions.

Explanation: