L7 - Fundamental Principles and Earnings Multiple_2001s2

G k g 1 g 1 ratio payout g k k 1 g 1 1 g 1 ratio

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g - (k ) g + (1 * g) + (1 * Ratio Payout + g - k ) k + (1 g) + (1 1 * g) + (1 * Ratio Payout = P EPS +ve relation between PE and the length of the high growth period. PE is more sensitive to changes in the length of high growth period when the level of growth is high than when the g is low. When a high growth firm loses its competitive advantage as revealed by a fall in earnings growth, its PE ratio can fall spectacularly. You should understand why Apple is so concerned about the rise of Samsung!
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