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If a company has a Price Earnings Ratio (PER) which is higher or lower than the average PER for its industry sector, what might it indicate?

If a company has a PER that is significantly lower than the average PER for its industry sector, it may be an indication that share market investors believe that the company will grow at a slower rate than its industry, or that the quality of its earnings is low, relative to its peers.

If a company has a PER that is significantly higher that the average PER for its industry sector, it may be an indication that share market investors believe that the company will grow at a faster rate than its industry, or that a better performance is expected from the company in the future. It may also be that the share is being valued for its asset backing (I.e. brand names, mastheads, etc) and not its earning potential.

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