Question 4.22: Other Comprehensive Income in Analysis An analyst is looking...

International Financial Statement Analysis

Other Comprehensive Income in Analysis

An analyst is looking at two comparable companies. Company A has a lower price/ earnings (P/E) ratio than Company B, and the conclusion that has been suggested is that Company A is undervalued. As part of examining this conclusion, the analyst decides to explore the question: What would the company’s P/E look like if total comprehensive income per share—rather than net income per share—were used as the relevant metric?

	Company A	Company B
Price	$35	$30
EPS	$ 1.60	$ 0.90
P/E ratio	21.9x	33.3x
Other comprehensive income (loss) $ million	($16.272)	$ (1.757)
Shares (millions	22.6	25.1

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