A low P/E for a stock indicates that
A)people may expect earnings to fall in the future,perhaps because the firm will be faced with increased competition.
B)its dividends have been low so that no one is willing to pay very much for it.
C)the corporation is possibly overvalued.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A low P/E ratio suggests that investors are willing to pay less for each dollar of earnings generated by the company. This could be due to the expectation of a decline in earnings in the future, which could be caused by increased competition or other factors. It is not necessarily an indication that the corporation is overvalued or that dividends have been low, although these factors could contribute to a low P/E ratio.

A Low P/E for a Stock Indicates That