题干中estimates of growth rather than

问题如下：

Western Investment Analytics specializes in the valuation of thinly traded equities. Harriet Hilliard, one of Western’s analysts, is currently working to establish the value of Hattie’s Apparel, a small textile and clothing wholesaler headquartered in the southern United States. Hattie’s Apparel is a publicly traded company; in a typical week, however, fewer than 1,000 shares trade. Triway Textiles, Inc. is a NASDAQ-listed company that very closely resembles Hattie’s Apparel’s business activities but is far more actively traded.

EXHIBIT 1

HATTIE’S APPAREL VS. TRIWAY TEXTILES SELECTED FINANCIAL INFORMATION

Matthew Colbaugh, Hilliard’s supervisor, recommends that she add one approach to her analytical tool bag. He suggests that he would like to see a comparison of Hattie’s Apparel’s P/E-to-growth ratio (PEG) with Triway Textile’s PEG. “Even if you base the PEG analysis on current prices, earnings, and estimates of growth rather than their forward-looking equivalents, the relative PEG of Hattie’s Apparel compared with that of Triway Textiles is of interest to me,” states Colbaugh.

If Hilliard adopts Colbaugh’s second recommendation regarding additional analytical models, which of the following best describes the result? The metric suggested by Colbaugh:

选项：

A.

assumes that the relationship between P/E and growth is nonlinear

B.

shows Hattie’s Apparel is less attractive than Triway Textiles

C.

fails to capture differences in risk between Hattie’s Apparel and Triway Textiles.

解释：

C is correct. Colbaugh suggests comparing Hattie’s PEG with Triway’s PEG. PEG is useful but must be used with care: PEG assumes a linear relationship between P/E and growth, does not factor in differences in risk, and does not account for differences in the duration of growth. Furthermore, per computations shown in the following table, Hattie’s Apparel is more attractive than Triway Textiles based on PEG, not less attractive.

A is incorrect because PEG assumes a linear relationship between P/E and growth.

B is incorrect because stocks with lower PEGs are more attractive; Hattie’s current P/E ratio is less than that of Triway (see table above).