1. Assuming the two companies you are researching are public companies; what is the most recent P/E ratio of the two companies? As they are in the same industry, why are they different? The two in question are Bank of America and Wells Fargo
2. More than mostly, PE ratios have no meaning if there is no stock :o) What other areas could a ratio be without worth?
Answer:
Most recent PE ratio are as under
| P/E Ration | |
| Bank of America | 15.1 |
| Wells Fargo PE Ratio | 12.84 |
As they are in the same industry, why are they different?
Answer:
- Growth prospects of companies in the same industry may be different.
- though cash flow statements may identical, but one has higher interest expense than other company. It is also possible that company has particular type of tax shield .
- when a company has equity value , debt does not grow with linearly with its net income growth. Here equity value grows faster than the net income.
- if there is expectations that in future returns and future growth for other company may be lower
2
More than mostly, PE ratios have no meaning if there is no stock :o) What other areas could a ratio be without worth?
Answer:
The given statement is true in the sense that, if company has no stock then there is no meaning of PE ratio , because PE ratio calculated by current market price stock by (EPS)earning per share.
Formulla are as under
