A Company with a PEG Ratio of Less Than One

question 2

Multiple Choice

A company with a PEG ratio of less than one would be interpreted as having a stock price:

• A) that is underpriced given earnings and expected earnings growth.
• B) that is low relative to the company's growth prospects.
• C) that is high relative to the company's growth prospects.
• D) that is overvalued.

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Definitions:

Comparative Advantage

A theory that suggests a country should specialize in producing and exporting goods and services for which it has the lowest opportunity cost.

Resources

Land, labor, capital, and entrepreneurial ability used to produce goods and services.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to specialized production and trade.

Absolute Advantage

A situation in which a country, individual, or company can produce a good at a lower cost per unit than competitors.