Stock analyst: “We believe Company A’s stock will appreciate by 35% a year for the next 5 to 7 years. Company A just became the leader in its industry and we expect its sales to grow at 8% a year.” Commentator: “But how can the stock’s price be expected to grow more quickly than the company’s underlying sales”? Which of the following facts would best support the stock analyst?

A The company's expenses will be declining over the next 5 to 10 years.

B The company just won a patent on a new product

C Company A's stock is currently overvalued by a significant amount

D The 5 to 7 year time frame is too long for anyone to accurately forecast.

Solution

Correct Answer: Option A

Solution

Practice More Questions on Our App!

Related Topics