Companies can be valued differently, based on the sector in which they operate. This is because different sectors have varying expectations in terms of growth and innovation.
Technology, for example, is generally recognized as the industry that delivers the most value. Tech companies are characterized by high P/E ratios. It’s common to see tech companies with a P/E ratio above 50.
When investing in a particular industry, it’s important to know what a common valuation in that industry looks like. The way to do that is to compare companies that operate in the same industry.
Industries vary in terms of value for a number of reasons, including the number of available business projects in that industry, the popularity of the industry, or the number of young companies in the sector.
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