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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Suresh who wrote (32004)	6/22/2000 10:36:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

That is the basic premises of the BW article..<<PEG is obtained by P-E divided by the estimated annual earnings over the next 5 years. >> Now if only next year earnings are to be considered at 31% I just would like to know what so holy or mathematically sacrosanct about next year earnings that only P/E resulting from that year earnings need to be divided by the growth rate. The whole concept of future earnings and growth is what distiguishes PEG approach from P/E approach. If one assumes one year as the litmus test than P/E is really astronomical and would need serious reversion down. 31% growth over one year means nothing for future income growth, the whole purpose of PEG extended over 5 year as my small little mind think is to come out with an average earnings that depicts the consistency of earnings including growth, now PEG= P-E/growth rate. I would commit intellectual dishonesty towards the analyst of BW if his basic assumption of 5 year is discarded and I accuse him of mathematical incompetence. For me that is how I justified his computations and I am pretty relaxed about those, if only one year earnings are considered the PEG is high but his basic assumption cannot be overlooked once a judgement is passed. Regards as always Ike