Question: What does a high P / E imply about growth? Assume a P / E of a stock is 4 1 . 5 and that

What does a high P/E imply about growth?
Assume a P/E of a stock is 41.5 and that the P/E of the market is 19.0. This is approximately what the market and Tesla are now if we use today's price and the latest 12-month earnings per share for both.
If we completely ignore time value of money and the fact that the market pays dividends and buys back shares which Tesla does not, how much does Tesla's ANNUAL growth have to be to justify its 41.5 P/E and assuming its above-average growth lasts 6 years?
At the end of the above-average growth period, assume that the P/E of Tesla is 19 reflecting the same growth rate and risk as the market.
Note: Enter your answer with three decimals. For instance, if your answer is 50.43%, enter .504.
Hints:
For the P/E of Tesla to fall to the market's P/E of 19, Tesla's earnings must rise a lot. You have to determine how much Tesla's earnings rise must rise. Once you have this information, you have to determine how much it rises each year to get to that point. To do so, use the formula (earnings at period N / $1 of earnings today)^(1/ # of years of above average growth)-1.
I don't give you the current earnings of Tesla or the market, but since this is a ratio you don't need it. The denominator of 41.5 P/E and the 19 P/E are both $1(1 for $1 of earnings for each $41.5 or $19.0 of price). What does Tesla's earnings need to rise to for it to be a 19.0 P/E?

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