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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (23972)	5/20/2006 2:35:28 PM
From: Carl Worth	Read Replies (3) \| Respond to of 78751

i've found PEG to be a very useful metric in terms of evaluating long term expectations for an investment, especially in terms of comparing two companies to determine which one i would rather own for the long term simply put, if company A is trading at 10x earnings and growing at 10% a year, it is reasonable to expect that a year from now, the stock price will be 10% higher...if company B is trading at 12x earnings, but growing their earnings at 15% a year, it is reasonable to expect that the stock price will be 15% higher in a year, since the higher growth warrants the stock continuing to trade at the higher multiple extrapolating this to 5 years of performance has company A's stock trading 61% higher while company B's stock will have more than doubled as such, whereas company A may appear more attractive at the current time based on a lower P/E ratio (and perhaps lower P/B, P/S, etc), company B's growth makes it a far superior long term investment it's great to pay a low multiple of sales, earnings, book, etc., but the main thing that drives the price of a company's stock higher is the growth of their revenues and earnings, so leaving growth out of the equation would seem to be a huge disadvantage in analysis JMHO of course