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vijayM
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Joined: 21/Dec/2007
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 Topic: PEG RATIO Posted: 11/Jan/2011 at 2:43pm |
In "one up on wall street", Peter Lynch has talked about PEG ratio, PE ratio, Growth rates on many occasions. Though the PEG definition is simple i.e. PE/Sustainable Future Growth rate, calculating the same is not simple as it depends on sustainable future growth rate.
According to him, the most important factors that affect future growth rates are: 1]Cost reduction 2]expansion into new markets 3]raising of prices 4]selling of more products 5]closing/revitalizing a losing operation.
Since the estimated future growth rate varies from one analyst to other, it is difficult have one value for PEG ratio. I use the consensus estimate given by Rueters.com to arrive at PEG.
However small companies like Hawkins or zydus, we don't get eps estimates on Reuters. TEDies can share their way of how they find PEG especially for smaller companies.
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If a business does well, the stock eventually follows:Warren Buffett
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manish_okhade
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 Posted: 11/Jan/2011 at 6:18pm |
Finding growth rate is an art than science. Literature says that to refer to MCap wrt to business expansion in terms of scalalbility, Competition etc. These macro parameters help to loosly determine growth rate, past extrapolation is dangerous hence PEG is a very risky tool. PEG is good for those who invest with diversification and ready for risks and work on smart probabilities.
Absolute investors like WB does not use PEG. Since Peter Lynch is from MF sector so he is accustomed to use it because like Buffette he can not wait for equity to fall to tempting level to accumulate, MF Mgr needs to deliver on daily basis so he recommended PEG as simple tool.
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Cornell
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Joined: 28/May/2011
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 Posted: 29/May/2011 at 7:24pm |
is there any site /s which gives historical PE ratios for stocks
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Cornell
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rocky
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 Posted: 29/May/2011 at 10:46pm |
Check out www.moneyworks4me.com ... its a paid website .
If you find anything else please update .
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vijayM
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Joined: 21/Dec/2007
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Posts: 649
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 Posted: 25/Nov/2011 at 7:41pm |
Basant Sir,
To find PEG ratio, should we use:
1] PEG = TTMPE/ Projected 3 year growth rate
or
2] PEG = TTMPE/ (ROE (1-DPR))
where ROE and DPR are estimated from latest Financial Year results (past).
or
3]PEG = TTMPE/ (ROE (1-DPR))
where ROE and DPR are estimated for current Financial Year (projected).
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If a business does well, the stock eventually follows:Warren Buffett
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basant
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 Posted: 25/Nov/2011 at 8:03pm |
As per Peter Lynch it is 1.
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rohit1889
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 Posted: 25/Nov/2011 at 10:03pm |
And the projected growth rate,is an educated guess by studying the business dynamics?
May be thats why investing is an art not a science.
Sir can PEG be applied to stocks from all sectors?
If not what are the exceptions?
Banks?
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If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won't get bored.
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vijayM
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Joined: 21/Dec/2007
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 Posted: 25/Nov/2011 at 10:12pm |
I think only real estate stocks (asset plays) are to be excluded from PEG analysis. For banks, I don't think there is anything wrong in applying PEG. However P/BV is to be given more weightage for banks.
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If a business does well, the stock eventually follows:Warren Buffett
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