- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 8. Equity Valuation: Concepts and Basic Tools
- Subject 5. Multiplier Models
CFA Practice Question
A company with a high P/E ratio is expected to ______
B. underperform the market.
C. grow faster than the market.
A. go bankrupt.
B. underperform the market.
C. grow faster than the market.
Correct Answer: C
A high P/E is associated with firms having high expected growth rates. Investors are willing to pay a high price relative to EPS. A high P/E can be the result of a bull market or a decline in EPS.
User Contributed Comments 1
| User | Comment |
|---|---|
| khalifa92 | the dividends displacement of earnings phenomenon |