• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exam Results

Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

why CAPM is not proper for companies with low P/E ratio?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › why CAPM is not proper for companies with low P/E ratio?

  • This topic has 3 replies, 3 voices, and was last updated 12 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 27, 2011 at 7:29 am #48664
    Anonymous
    Inactive
    • Topics: 3
    • Replies: 0
    • ☆

    why CAPM is not proper for companies with low P/E ratio?

    May 29, 2011 at 6:37 pm #82396
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    In theory, CAPM would apply to any shares. However, we do not have a perfect market, and a low PE (relative to other companies in the same sort of business) could suggest that the share is being undervalued.

    November 18, 2012 at 12:18 am #82397
    dazhong0703
    Member
    • Topics: 44
    • Replies: 130
    • ☆☆

    So P/E ratio low, is it because share is undervalued, or shareholders’ value is low? What other factors need to consider to get a more appropriate conclusion, pls? Thank you.

    November 18, 2012 at 9:11 am #82398
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    A low PE suggests that maybe the share is undervalued. (The value of the share itself might be high or might be low).
    Other things you might look at for confirmation are the historical growth (compared with similar companies), any knowledge of the companies future plans that might have affected expectations, even the asset value.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • Josfel on Relevant cash flows for DCF Taxation (example 4) – ACCA Financial Management (FM)
  • askar.turganbayev@gmail.com on AA Chapter 2 Questions
  • RashidMh on MA Chapter 1 Questions Accounting for Management
  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in