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What are the Possible Secondary Problems with P/E Ratio Analysis of a Company, or an Industry?

April 26, 2017analysis COMPANY Industry p possible problems ratio Secondary

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What are the Possible Secondary Problems with P/E Ratio Analysis of a Company, or an Industry?

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Possible secondary problems with the P/E ratio include the following: • P/E ratios use historical data. Historic data is not always a sound basis for future earnings. • Historic accounting policies can vary significantly between countries (for example there are significant differences between UK GAAP and US GAAP). • The P/E can vary due to short-term influences (eg recent poor historic results).