Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.

Mark Cannan is updating research reports on two well-established consumer companies before first quarter 2011 earnings reports are released. His supervisor, Sharolyn Ritter, has asked Cannan to use market-based valuations when updating the reports.Delite Beverage is a manufacturer and distributor of soft drinks and recently acquired a major water bottling company in order to offer a broader product line. The acquisition will have a significant impact on Delite’s future results.You Fix It is a United States retail distributor of products for home improvement, primarily for those consumers who choose to do the work themselves. The home improvement industry is cyclical; the industry was adversely affected by the recent downturn in the economy, the level of foreclosures, and slow home sales. Although sales and earnings at You Fix It weakened, same store sales are beginning to improve as consumers undertake more home improvement projects. Poor performing stores were closed, resulting in significant restructuring charges in 2010.Before approving Cannan’s work, Ritter wants to discuss the calculations and choices of ratios used in the valuation of Delite and You Fix It. The data used by Cannan in his analysis is summarized in Exhibit 1.
| Exhibit l.Select Financial Data forD elite Beverage and You FixIt |
| Delite Beverage | You FixIt |
| 2010Eamingsper share(EPS) | $3.44 | $1.77 |
| 2011 estimated EPS | $3.50 | $1.99 |
| Book value per share end of year | $62.05 | $11.64 |
| Current share price | $65.50 | $37.23 |
| Sales(billions) | $32.13 | $67.44 |
| Free cashflow per share | $2.68 | $0.21 |
| Shares outstanding end of year | 2，322，034，000 | 1，638，821，000 |


Cannan advises Ritter that he is considering three different approaches to value the shares of You Fix It:● Approach 1Price-to-book (P/B) ratio● Approach 2Price-to-earnings (P/E) ratio using trailing earnings● Approach 3Price-to-earnings ratio using normalized earningsCannan tells Ritter that he calculated the price-to-sales ratio (P/S) for You Fix It, but chose not to use it in the valuation of the shares. Cannan states to Ritter that it is more appropriate to use the P/E ratio rather than the P/S ratio because:● Reason 1Earnings are more stable than sales.● Reason 2Earnings are less easily manipulated than sales.● Reason 3The P/E ratio reflects financial leverage whereas the P/S ratio does not. Cannan also informs Ritter that he did not use a price-to-cash flow multiple in valuing the shares of Delite or You Fix It. The reason is that he could not identify a cash flow measure that would both account for working capital and non-cash revenues, and also be after interest expense and thus not be mismatched with share price.Ritter advises Cannan that such a cash flow measure does exist. Ritter provides Cannan with financial data on three close competitors as well as the overall beverage sector, which includes other competitors, in Exhibit 2. She asks Cannan to determine, based on the price-to-earnings growth (PEG) ratio, whether Delite shares are overvalued, fairly valued, or undervalued.
| Exhibit 2.Beverage Sector Data |
| Forward P/E | Eam ings Growth |
| Delite |  | 12.41% |
| Fresh Iced Tea Company | 16.59 | 9.52% |
| Non utter Soda | 15.64 | 11.94% |
| Tasty RootBeer | 44.10 | 20% |
| Beverage sector average | 16.40 | 10.80% |


After providing Ritter his answer, Cannan is concerned about the inclusion of Tasty Root Beer in the comparables analysis. Specifically, Cannan asks Ritter:“I feel we should mitigate the effect of large outliers, but not the impact of small outliers (i.e., those close to zero), when calculating the beverage sector P/E. What measure of central tendency would you suggest we use to address this concern?”Ritter requests that Cannan incorporate their discussion points before submitting the reports for final approval.
Cannan’s preference to use the P/E ratio over the P/S ratio is best supported by:
Option A:Reason 1
Option B:Reason 2
Option C:Reason 3

Answer: C