Question

. Growth stocks usually exhibit ______ price-to-book ratios and ______ price-to-earnings ratios.A. low; lowB. low; highC. high; lowD. high; high

Answer 1

Answer is D.

Step-by-step explanation:

In an efficient market which suggest that the price-earnings ratio (PE ratio) states what the investor thinks about the growth opportunities of an organization. Which in theory states that the growth stock tends to have a higher PE ratio, some studies also undertake that high forecasted growth and current earnings growth are directly interlinked with high PE ratio.

But some studies have also disputed with the above explanation, they believe that low PE stocks i.e. Value stocks are more attractive than growth stocks, the low PE stocks outperform the growth stocks in minimum 5year period.

Then again if you look at the growth stocks from a long term perspective they are stable among others in the industry segments and investors are more interested in long term performance of their portfolios.

Answer 2

Answer:Growth stock usually exhibit high price to book ratio and high price to earning ratio.

Explanation: The Price to Earning ratio is a key component of the Price to earning growthratio. You can calculate the Price to earning by taking a stock's current share price and dividing it by its earnings per share (EPS). This number allows you to determine if the market has priced a stock higher or lower in relation to its earnings.

A stock with a very high Price to earning is viewed as overvalued and not a good choice.