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Basic Question 5 of 11
A justified price multiple is a price multiple at which the stock ______
B. should be fairly valued based on the method of comparable or forecasted fundamentals.
C. is expected to trade for the next 4 quarters.
A. has traded for the past 4 quarters.
B. should be fairly valued based on the method of comparable or forecasted fundamentals.
C. is expected to trade for the next 4 quarters.
User Contributed Comments 3
| User | Comment |
|---|---|
| farhan92 | A =Trailing B= Leading |
| fabsan | wrong C = leading/ since A and C are contracdictory, B should be right |
| khalifa92 | Common criticism is multiples don't consider the future, counter criticism by forecasting the variables; justified price is extracted from forecasted fundamentals. |
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Learning Outcome Statements
explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables
calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value
CFA® 2025 Level I Curriculum, Volume 3, Module 8.