Identifying Undervalued Companies Using Price-to-Earnings Ratio

When evaluating companies in the same industry, analysts often use price multiples as a standard method for valuation. One common price multiple, the Price-to-Earnings (P/E) ratio, indicates how much investors are willing to pay per dollar of earnings. A higher P/E ratio may suggest that a company is undervalued compared to its peers, while a lower P/E ratio may indicate overvaluation. Consider the following company data:

Company A: P/E Ratio = 15

Company B: P/E Ratio = 20

Company C: P/E Ratio = 12

If an investor is assessing which company might be undervalued based on the P/E ratio, which company would they likely consider the most attractive investment?