P/E Ratio Analysis

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Assignment #1 Beatrice Antica Finance 26.01.2012 P/E Ratio Analysis | 2011 | 2010 | 2009 | 2008 | 2007 | RIM | 9.33 | 15.55 | 13.75 | 42.96 | 41.32 | NOKIA | 15.48 | 37.17 | 10.37 | 14.34 | 14.6 | APPLE | 14.61 | 19.3 | 20.08 | 18.91 | 39.05 | QUALCOMM | 19.96 | 22.73 | 47.05 | 24.13 | 21.67 | 1. What trends do you see and how can you explain the fluctuations in P/E ratios? In your answer, you may want to consider the state of the overall economy, technological advances, market trends, buying power of consumers, competitive play, etc. 2. Based on the P/E ratios, which of these companies would you invest $1,000 in and why? (Your hard-earned savings to date!) 3. Please name and discuss some of the limitations in basing investment decisions on P/E/ ratios. In order to have a better understanding over P/E Ratio Analysis I have provided two charts at the end of the material to support the data provided and the following interpretations required. The Chart Trends P/E Ratios shows the numerical trends over five years (2007-2011), and the Scatter Plot P/E Ratio is intended to reflect the fluctuations in P/E ratios over the same analyzed period. I personally found very difficult to split in three different subjects same topic over the P/E analysis shown above, therefore I will try to essay my reflections despite the standard detached, short answers you most likely expect to see. 3. Pure theory observations: When estimating if a company’s P/E ratios have a good value we need to understand what exactly a P/E ratio is. It is a valuation ratio of a company’s current share price compared to its per-share earnings.

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