We know that P/E should only really be used to compare companies within the same industry or to look at a company's earnings over time, but why would 2 similar companies (take just e.g Coke and Pepsi) who are by all means rivals, and share "similar" levels of success have such different P/E ratios? If Pepsi's P/E ratio was way higher then Coke's what would this mean?
2006-11-07 08:06:56 · 3 answers · asked by soph1a_star 1 in Business & Finance ➔ Other - Business & Finance
A high P/E ratio means the company is "over valued". This is bad. I dont remember for sure, but I think 20 and under is ok. In the late 90's when companies were overvalued, many had P/E ratios in the 100's. Similar companies in the same industry can have different P/E ratios based on many factors:
- of course some of it is revenue
- some of it is how efficiently the company is ran.
- some of it is "spin" ie investor perception.
You could have two companies that have the same revenue and one has twice the marketing staff, twice the production staff, and twice the leadership and pays them all twice as much. That would obviously eat into the profit.
2006-11-07 08:17:30 · answer #1 · answered by Tim B 1 · 0⤊ 0⤋
its a measure of how many people are betting that one will make more than the other in the future. Right now I think that Pepsi is overtaking coke in sales. a PE is a snapshot of todays numbers. If it looks like one co. is growing faster than another then the PE will be higher.
2006-11-07 08:27:24 · answer #2 · answered by zocko 5 · 0⤊ 0⤋
No! I completely comprehend what you propose. people consistently question me, "Which do you like greater useful? Coke or Pepsi?" and that i merely say, "Is there a huge difference?" i'm able to't tell. (and a celebrity for you! :D)
2016-12-28 15:26:38 · answer #3 · answered by ? 3 · 0⤊ 0⤋