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Interview Question

Investment Banking Analyst Interview

Take two currently identical companies. One has a higher

  P/E ratio than another. Why could this be?
Answer

Interview Answer

1 Answer

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Benjamin Graham has explained in one of his works that- it is not necessary that all common stocks with the same average earnings should have the same value.

The common-stock investor will properly accord a more liberal valuation to those which have current earnings above the average, or which may reasonably be considered to possess better than average prospects.

Snigdha Mehrotra on Apr 27, 2012

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