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Over the past 5 years, Company X has posted double-digit

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Manager
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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25 Dec 2015, 22:23
anilnandyala wrote:
Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?
a) Company X has a large market share in its industry.
b)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
c)The growth of Company X is likely to persist in the future.
d)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
e)The stock of Company X will outperform other stocks in the same industry.

With basic understanding of stock market it's very easy to answer the question in less than a minute
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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02 Mar 2016, 19:56
samark wrote:
Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

ok, let's understand the argument:
last 5y -> XX increase in R.
improvement in operating margins.

growth will continue in the future -> conclusion - stock will increase in value.

1. the price of the stock can be influenced by the increase in R and/or improvement in operating margins
2. the price of the stock does not reflect future increases in revenues (which is kind of unlikely if you think about )

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
this one is out of scope.

B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
growth prior the 5 years mentioned is out of scope.

C)The growth of Company X is likely to persist in the future.
this is an inference, and is actually stated in the argument. so can't be the assumption.

D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
AHA! this is the 2 assumption identified by me. If you negate this answer choice - you see how the conclusion is shattered.

E) The stock of Company X will outperform other stocks in the same industry.
comparing with other stocks is out of scope.

D seems to be the best.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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02 Mar 2016, 21:21
siyer wrote:
Use POE.

A)Company X has a large market share in its industry.
Irrelevant. Does not tell us how the value of the company's stocks will appreciate.

B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
This tells us that the Sales increased when the operating margins improved. Does not say anything about stock value.

C)The growth of Company X is likely to persist in the future.
Restatement. Does not say anything about stock value.

E) The stock of Company X will outperform other stocks in the same industry.
Comparison with stocks of other companies is irrelevant.

D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
Correct answer. Author is assuming that the price of the stock should be/will be higher due to the growth in revenues and improvement in operating margins.

I think if we negate the option C , conclusion falls. IMO, answer shloud be C. How D can be the answer. pls. explain.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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03 Mar 2016, 22:15
1
robu wrote:
siyer wrote:
Use POE.

A)Company X has a large market share in its industry.
Irrelevant. Does not tell us how the value of the company's stocks will appreciate.

B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
This tells us that the Sales increased when the operating margins improved. Does not say anything about stock value.

C)The growth of Company X is likely to persist in the future.
Restatement. Does not say anything about stock value.

E) The stock of Company X will outperform other stocks in the same industry.
Comparison with stocks of other companies is irrelevant.

D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
Correct answer. Author is assuming that the price of the stock should be/will be higher due to the growth in revenues and improvement in operating margins.

I think if we negate the option C , conclusion falls. IMO, answer shloud be C. How D can be the answer. pls. explain.

Option C already stated in the argument.

"Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation."

Assumption is an unstated premise which should support the conclusion. But option C is the repetition of what has been already stated in the argument.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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08 Mar 2016, 23:10
"C" cannot be the answer since it is clearly stated in the argument that the growth is likely to persist in the future. Assumptions are unstated facts. Assumptions are always implicit never directly stated. Hence "C" can't be the assumption. It is stated that there has been a double digit growth in revenues and the author says that if this growth continues the stocks will experience dramatic appreciation. Hence the author assumes that stocks will appreciate further or in other words the current price of the stocks of company X does not fully reflect the promising growth prospects of the firm. Hence the answer is "D."
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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17 Mar 2016, 09:16
Hi
If we use the negation technique answer choice (d) says:
The current price of the stock of Company X fully reflects the promising growth prospects of the firm.

Doesnt this strengthen the argument further the stock of Company X will soon experience dramatic appreciation..
How negating it weakening the argument?
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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21 Mar 2016, 23:20
The author intends to say that future price of stock will show promising growth. But we must pre-think why is current price not showing the appreciation? The answer choice just answers the prethinking question.Since current price does not show growth prospects, it is possible that in future the stock price may reflect the growth of the company.

Strengthen answer choices can be assumptions.

These kinds of questions are easy to deal with a bit of practise.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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29 Jan 2017, 11:05
The argument concludes that the stock of the firm will experience rapid growth. The basis for this claim is that the firm has shown strong historical performance that is likely to continue in the future. The stock will appreciate dramatically in the future as a result only if it has not already appreciated in anticipation of the company's expected growth.

(A) The argument focused on the potential for stock appreciation rather than company weight in the industry. A company with a large market share may well experience poor stock performance, while a company with a small market share may continue to grow and increase in value.
(B) Since the conclusion of the argument is made regarding the future outlook, it is not necessary to assume that the company had been growing, or had even existed, prior to the past 5 years. A new firm that has been in existence for only 5 years may well present an excellent investment opportunity.
(C) This statement is explicitly stated in the argument and therefore does not have to be assumed.
(D) CORRECT. If this assumption were not true, i.e. if the current stock price already reflects future growth prospects, then the premise that the company will experience high growth is certainly insufficient to warrant future stock price appreciation, since all of this growth would already be reflected in the current price. It is necessary to assume that the current price of Company X stock does not yet reflect the promising growth prospects of the firm, allowing the possibility that the stock price will rise further.
(E) Note that the argument makes a claim about the absolute return of stock X rather than its return relative to the industry. Therefore, to justify the rapid growth in the stock price, it is not necessary to assume that the company will outperform its competitors. For example, if the industry itself is growing very rapidly, other companies in the industry can experience just as rapid appreciation in stock
prices.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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03 May 2017, 00:47
agourav wrote:
The argument concludes that the stock of the firm will experience rapid growth.
The basis for this claim is that the firm has shown strong historical performance
that is likely to continue in the future. The stock will appreciate dramatically in the
future as a result only if it has not already appreciated in anticipation of the
company's expected growth.
(A) The argument focused on the potential for stock appreciation rather than
company weight in the industry. A company with a large market share may well
experience poor stock performance, while a company with a small market share
may continue to grow and increase in value.
(B) Since the conclusion of the argument is made regarding the future outlook, it
is not necessary to assume that the company had been growing, or had even
existed, prior to the past 5 years. A new firm that has been in existence for only 5
years may well present an excellent investment opportunity.
(C) This statement is explicitly stated in the argument and therefore does not
have to be assumed.
(D) CORRECT. If this assumption were not true, i.e. if the current stock price
already reflects future growth prospects, then the premise that the company will
experience high growth is certainly insufficient to warrant future stock price
appreciation, since all of this growth would already be reflected in the current
price. It is necessary to assume that the current price of Company X stock does
not yet reflect the promising growth prospects of the firm, allowing the possibility
that the stock price will rise further.
(E) Note that the argument makes a claim about the absolute return of stock X
rather than its return relative to the industry. Therefore, to justify the rapid growth
in the stock price, it is not necessary to assume that the company will outperform
its competitors. For example, if the industry itself is growing very rapidly, other
companies in the industry can experience just as rapid appreciation in stock
prices.

How can you think in a right way? I mean how you expect to find an option that will talks about the unawareness of people of the true value or the potential growth of the stock?
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Over the past 5 years, Company X has posted double-digit  [#permalink]

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26 Jun 2017, 01:55
samark wrote:
Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
C)The growth of Company X is likely to persist in the future.
D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
E) The stock of Company X will outperform other stocks in the same industry.

Hi Guys,

Although I agree D is best here, it doesnt seem to fit in quite well. Here's my reasoning please correct me if I am wrong - negating D, "the current price of the stock of Company X DOES fully reflect the promising growth prospects of the firm" its reasonable to say that even if the current price reflect the future price why isn't there a scope to have growth on top of it?? It may improve even though the current price reflects the future price, appreciating the stocks of Company X.

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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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26 Jun 2017, 07:15
Merged topics. Please, search before posting questions!
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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05 Aug 2017, 08:56
easy D.

as all the positive things are not prices in the stock price, the author thinks that the stock has the potential to become a multi-bagger.
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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10 Aug 2018, 08:36
samark wrote:
Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
C)The growth of Company X is likely to persist in the future.
D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
E) The stock of Company X will outperform other stocks in the same industry.

Applying the negation technique
straightforward D
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Re: Over the past 5 years, Company X has posted double-digit  [#permalink]

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09 Dec 2018, 14:11
Narrowed it down between C & D, C restates the prompt and D provides a reason on why the author assumes the conclusion of the increase in price is assumed.

a,b,e are irrelevant
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Over the past 5 years, Company X has posted double-digit  [#permalink]

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31 Mar 2019, 02:40
Here the author is saying that the company growth is likely to persist and future stock price will be appreciated. So the assumption is that company has potential to grow and the current stock appreciation does not represent the actual potential of the company. Option D clearly states that.

+1 for D

Over the past 5 years, Company X has posted double-digit growth in annual revenues, combined with a substantial improvement in operating margins. Since this growth is likely to persist in the future, the stock of Company X will soon experience dramatic appreciation.

The argument above is based on which of the following assumptions?

A)Company X has a large market share in its industry.
B)Prior to the last 5 years, Company X had experienced similarly dramatic growth in sales associated with stable or improving operating margins.
C)The growth of Company X is likely to persist in the future.
D)The current price of the stock of Company X does not fully reflect the promising growth prospects of the firm.
E) The stock of Company X will outperform other stocks in the same industry.
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Over the past 5 years, Company X has posted double-digit   [#permalink] 31 Mar 2019, 02:40

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