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30 Jul 2019, 03:41
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Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
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Question Stats:
47% (01:25) correct
53%
(01:29)
wrong
based on 266
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Stock analyst: "We believe Company A's stock will appreciate at 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.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
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.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
30 Jul 2019, 08:02
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Bunuel
Stock analyst: "We believe Company A's stock will appreciate at 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.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
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.
E. Company A's industry peer group is expected to experience stock appreciation rates of 30% over the same time horizon.
Stock Price Appreciation = Anticipation of Future profit....
The stock analysts reasoning about increase in stock prices has been criticized by the commentrator on the grounds that Sales (Revenue) during the same period , so how can the profits of the firm increase...
Do rememeber , Profit = Revenue - Expenses...
Herer (A) only talks about decrease in expenses leading to increase in profitability of the firm....
(B) Winning patents will have no effects on the profitability of the firm....
(C) Overvaluation of stock - Out of scope.
(D) Forecasting within a span of 5 to 7 years , too big timeframe - Out of scope , Irrelevant.
(E) Comparison with peer groups is out of scope as profitabliity of a firm has got nothing to do with its peers...
Hence IMHO (A)
01 Apr 2022, 06:19
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Hello from the GMAT Club VerbalBot!
Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).
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Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).
Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
