Question

Company XYZ closed at $49.37 per share with a P/E ratio of 12.98. answer the following questions.

a. how much were earrings per share?
b. does the stock seem overpriced, underpriced, or about right given that the historical P/E ratio is 12-14?

Answer 1

To calculate earnings per share (EPS), divide the net income by the number of shares outstanding. The stock seems to be about right or slightly underpriced based on the historical P/E ratio.

Step-by-step explanation:

To calculate earnings per share (EPS), you divide the net income by the number of shares outstanding.

a. To find the earnings per share (EPS), divide the net income by the number of shares outstanding. There is no information given about the net income, so we cannot calculate the exact earnings per share.

b. To determine if the stock is overpriced, underpriced, or about right, we compare the current P/E ratio to the historical P/E ratio. Since the historical P/E ratio is 12-14 and the current P/E ratio is 12.98, the stock is about right or slightly underpriced.