XYZ Corporation has a P/E ratio of 20 and EFG Corporation has a P/E ra

XYZ Corporation has a P/E ratio of 20 and EFG Corporation has a P/E ratio of 10. It is likely that

A) investors expect XYZ’s earnings to grow faster than EFG’s earnings.
B) investors believe XYZ stock is overvalued.
C) investors believe that for the same level of earnings growth, XYZ is a higher risk company.
D) XYZ’s earnings per share are twice the earnings per share of EFG.

ANSWER

A