Question

1. Apple's common stock is currently trading at $160 per share. The latest quarterly earnings of Apple showed that the company earned $12 per share (i.e., EPS) in Q4, 2018. Most analysts expect this EPS to hold for Apple in 2019. Assume that Google and Facebook, two of Apple's potential competitors in US, are currently trading at P/E ratio (i.e., price/earnings) of 41 and 22, respectively. What would you say about the valuation of Google's stock currently relative to Apple and Facebook using only the P/E multiples apparoch?

   	1.	The P/E mutiples approach would suggest that Apple is currently overvalued relative to Google and Facebook.
   	2.	The P/E mutiples approach would suggest that Google is currently overvalued relative to Apple and Facebook.
   	3.	I would never use the P/E multiples approach because it is totally flawed in efficient financial markets.
   	4.	The P/E mutiples approach would suggest that Apple is currently correctly-priced relative to Google and Facebook.

Answer 1