Identify two companies operating in the same industry. Find their forward P/E ratios (Stock Price per share divided by Earnings per Share expected next year) and expected annual growth in EPS for the next five years.

Instructions

To find the P/E and growth estimates:

1. Go toYahoo! Finance finance.yahoo.com
2. .Using the search bar at the top of the page, type in the name of a company and select it.
3. Under the current price, there is a horizontal line of blue links that act as tabs.
4. For the P/E number:
5. Click on the Statistics tab.
6. Under the heading Valuation Measures, look for the number to the right of Forward P/E. That is the P/E ratio.Note:The PEG ratio under the statistics tab adjusts for growth by dividing the P/E ratio by the growth rate. Typically the PEG ratios will be more aligned than the P/E ratios.
7. For the growth estimates:
8. On the same page, click on the Analysis tab.
9. Scroll down to the section called Growth Estimates, which may be the last tab.

Using the data you've retrieved, answer the following questions:

1. What are the companies, their P/Es, and expected growth rates?
2. We expect to pay more per share for earnings that are growing at a faster rate.Does the company with the higher expected growth rate also have the higher P/E ratio? If not, are there other factors that might explain the difference?
3. Provide a brief justification for the company with the higher P/E being more expensive.