An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of $7 billion, pays a relatively high dividend with little increase in earnings, and has a P/E ratio of 11. Stock Y has a market capitalization of $62 billion but does not currently pay a dividend. Stock Y has a PE ratio of 39. Stock Z, a housing industry company, has a market capitalization of $800 million and a P/E of 18
a. Classify these stocks according to their market capitalizations.
b. Which of the three would you classify as a growth stock? Why?
c. Which stock would be most appropriate for an aggressive investor?
d. Which stock would be most appropriate for someone seeking a combination of safety and earnings?