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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Dave who wrote (51441)	4/16/2001 10:35:38 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77399

Hi Dave OK, we can net out somewhere in the middle. PEG is a good ratio. Like furlongs per fortnight is a great ratio. Useful to some, but not universally. Comparing a company's stock price to its growth rate is a rather unique, "new age" way of valuing something. At least PE has some mathematical support behind it, since the sum of a series of numbers each related to the previous by a constant factor (e.g. growth rate?) is a constant times the first number. Problem is, each growth rate gives a different PE, which really sucks because people have to actually THINK in order to use such a dastardly measure. Thus the clever PEG. However, it's broken. But don't take my word for it. Try the following: calculate the series of ten terms (1+G)^n using G = 10%, 20%, ... versus G = 50%. Then look at the PEG values for each of these sums you get. Maybe post the results and an explanation why they make sense to the thread. That would demonstrate the usefulness of the ratio quite effectively I think. Of course, for people who want the luxury of investing in growth stocks without having to do messy things like math... well, PEG is ideal. John. P.S. PE doesn't work for growth stocks either.