Low expectations of future performance result in a low price-earnings (PE)ratio.

Name: Low expectations of future performance result in a low price-earnings (PE)ratio.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

A company with low expectations of future performance is considered to have lower growth prospects, which in turn leads to a lower PE ratio. This is because investors are willing to pay less for a stock that is expected to have less future earnings potential.

Low Expectations of Future Performance Result in a Low Price-Earnings