You are trying to choose between two stocks, Widget and Gadget. Widget has a current stock price of $30 and earnings per share of $2.00. Gadget has a current stock price of $20 and earnings per share of $1.00. Both are in the media industry and the average P/E ratio (price-to-earnings ratio) for this industry is 15. Use the P/E ratio to determine which stock you anticipate will have higher earnings.
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