Expected Growth Rates in Earnings and Dividends: Key Measure for Investors

Interpreting Measure of Prospective Growth Rates

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Question

Which measure may be interpreted as a measure of prospective growth rates in earnings and dividends that are expected by the market?

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A

P/E ratios must be compared across an entire industry to view relative valuations. It is useful to compare P/E ratios for individual firms with the industry average P/

E ratio and P/E ratios of other firms in the same industry.