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You are calculating the trailing PE correctly, but I'm unclear what you are doing with it. A stock is not valued by its historical performance; it is priced by the street based on expectations. The long term growth rate of USF is 20-25%. Based on next year's earnings of $1.64, the stock is currently trading at a PE of 20.5. (33.625 ö $1.64 = 20.5). Just a few days ago it was trading at a PE of 25 ($41), or the higher end of it's projected growth rate. It is now shifting to its lower end (20) because it missed estimates by a penny, and management has advised that next quarter will be at the lower end of the .25-.35 estimates. Missing the estimate for this quarter was bad enough, but the lower earnings guidance suggests that even at a PE of 20 on next years estimates, the stock may be fairly valued if not overvalued. Personally, I think the stock will hit 28-30. It will definitely be in the 20's, briefly, in another market correction. But it's a great long term buy in my opinion. Robert, you can also use a PEG rate as a guide, which is PE divided by LTG rate. I use PE based on estimates for 1 year out, because prices tend to reflect 6-12 months out. In USF's case, it has a PEG rate of 1, which means it is fully valued. |
