Question

What are the difficulties in using the PE ratio to value stock? 

   What are the difficulties in using the PE ratio to value stock?
Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
Stephen A. Ross;… 11th Edition
Chapter 8, Problem 14 ↓

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Inaccurate earnings: The PE ratio is calculated by dividing the stock price by the earnings per share (EPS). However, the accuracy of the PE ratio heavily relies on the accuracy of the reported earnings. If a company manipulates its earnings or engages in  Show more…

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