A company whose future earnings are expected to rise substantially is likely to have a higher price-earnings ratio than a company whose future earnings are expected to decline.

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This is because investors are willing to pay a premium for a company that is expected to grow its earnings in the future, which is reflected in a higher price-earnings ratio. Conversely, a company with expected declining earnings is perceived as less valuable, resulting in a lower price-earnings ratio.

A Company Whose Future Earnings Are Expected to Rise Substantially