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Strategies & Market Trends : Dave Gore's Trades That Make Sense -- Ignore unavailable to you. Want to Upgrade?

To: Dave Gore who wrote (3907)	3/15/2002 2:19:32 AM
From: Dave Gore	Respond to of 16631

Microsoft PEG = 1.6, VRTS = 5.9? Should you care? As odd as it sounds, most analysts and investors never really say much about PEG, even though almost everyone thinks it's a valid measurement of a stocks worth. In fact most traders have no idea what the PEG is of their favorite stocks. Price-Earnings-Growth, which is usually defined as the PE Ratio divided by the average growth rate of a stock over a 5 year period (or its average expected 5 yr. growth rate) was created to help us more accurately calculate a fair market value of a security. That is something that PE alone doesn't do very well. After all, a boring ol' cyclical stock with a PE of 10 that grows at 5% probably isn't worth as much as a high flying tech stock with a PE of 30 that has been growing at 60% per year for the last 3 years and is expected to grow at 30% per year for the next 5 years. Like VIX and other indicators, PEG may only be as important as the attention it gets. But to me, it is crucial in letting me know just how good a deal a stock is at a specific price point.