Market-Based Valuation Using P/E Ratio

When evaluating a publicly traded company, analysts often use market-based valuation techniques to estimate the company's equity. One common method is to look at the price-to-earnings (P/E) ratio of comparable companies in the same industry. However, it is important to understand how the P/E ratio can be misleading if not adjusted for certain factors.

Consider Company XYZ, which is in the technology sector. The average P/E ratio of similar technology companies is 20. Company XYZ has a P/E ratio of 15. Based on this information, what conclusion can be drawn about Company XYZ?