Question

Walker's has a price-earnings (PE) ratio of 16 compared to its industry average of 17. Generally speaking, which one of these statements applies to this situation?The average firm in the industry outperforms Walker's.

Answer 1

Answer:

Walker's did not outperform because it PE Ratio is close to Industry average. Industry's data is based on average which means some of the firms may have very high PE ratio and some might have quite lower than the average. It is not obvious that the Walker's outperformed or under-performed. Complete data about the individual firms might make us able to compare the performance of Walker's. Apparently its performance is up to the mark as its PE ratio is very close to Industry average.

Explanation:

PE Ratio is a term which show the investors confidence on the firm. It shows that how much price investors are willing to pay against each unit of earning.