Question

Select four stocks of your choice that are diversified across four different sectors or industries.

In your initial post, label your selected stock as “choice,” the competitor stock as “peer,” the industry information as “industry,” and list the P/E ratio for each of these categories.

Comment on your findings. Based on the P/E ratio, do you believe your choice stock to be fairly priced, a ‘value,’ or overpriced as compared to a peer and the industry as a whole? Why?

Answer 1

source: https://csimarket.com/index.php

PE ratio indicates the price paid for same level of earnings. A stock with a higher PE is considered to be more expensive.

Boeing is valued at PE of 43.92 whereas Embraer is valued at 46.83 and PE of aerospace industry as a whole is estimated at 26.86. Both boeing and embraer is valued quite high when compared to the industry. Embraer is valued even higher than boeing. As compared to the industry boeing appears to be highly overpriced whereas when compared to embraer it seems to be fairly valued.

Anixter Internation is priced at 12.19x, Chase corp is priced at 29.21x and the electric and wiring equipment is having a PE of 16.23. Compared to the industry, Anixter International is undervalued and is therefore a 'value' stock. Compared to Chase corp, Anixter International appears to be highly undervalued and is definitely a 'value' stock.

Goodyear tyres is valued at PE of 7.47, Cooper Tyre is valued at PE of 19.29 and tyre industry is as a whole is having PE of 8.51. Compared to the tire industry, Goodyear tyre is fairly valued since the stock and industry have PE ratios very close. However when compared to Cooper tyre, Goodyear seems to be a 'value' stock since its PE is quite less than Cooper.  

Envision Healthcare Corp is valued at PE of 43.52, Pharmerica Corp is valued at PE of 50.86 and the healthcare facilities industry is having a PE of 19.53. Compared to the industry, Envision Healthcare is highly 'overpriced' since its PE is more than double that of industry. Compared to Pharmerica corp, Envision appears to be slightly undervalued and hence will be considered as a 'value' stock.