Question

Under normal market conditions, among General Electric, Ford and SalesForce (all three are publicly listed US firms), which company’s P/E ratio would be highest, lowest and why (please make sure to explain)? If you had to purchase shares of one of these companies, which one would you buy and why?

Answer 1

Under normal market conditions, the price to earning ratio of Salesforce company would be highest.This is such because Salesforce is highly lucrative as it is expected to grow multifolds in coming years and among all these companies, it has the best survival chance in economic crisis like situation.So,it is always expected to command a premium over others. It is a new age cloud computing service which excels in consumer relationship management.

Among all these shares, ford company is expected to have the lowest price to earning ratio as it has been on a continuous downtrend and it is expected to go lower The business of ford is shrinking and it has the lowest survival chance in case of an economic cricis ss it is loadad with a lot of debt.

If I had to purchase a share among these three I would buy Salesforce because the company has the best future outlook and it relates to a service of future. Even though it is expensive,I expect it to grow more expensive so I will buy Salesforce.