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Pastimes : Georgia Bard's Corner -- Ignore unavailable to you. Want to Upgrade?

To: Rob D. who wrote (1026)	4/30/1998 6:51:00 PM
From: Crossy	Respond to of 9440

re: PE/Ratios Rob, there's only a problem with PE ratios: they are calculated NORMALLY over a year. But companies report QUARTERLY. This means they are LAGGING indicators, something the market has "already priced in". In order to make PE ratios a bit more explicative, You could look for the last quarter instead of the whole year and multiply the last quarter Earnings per share time 4 (4 quarters per year) to derive "implied current PE". This measure is a more CURRENT indicator than the normal PE calculation - which is usually caclulated over trailing 12 months (TTM). From a methodic point of view this can be justified if the business does NOT have an underlying seasonal trend in earnings and/or revenues, like on a farm or Greeting Cards.. You could improve the Implied current PE even more by taking non-recurring charges out of the calculation. This would then be called "normalized implied current PE" <G> hope this helps CROSSY

To: Rob D. who wrote (1026)	4/30/1998 7:35:00 PM
From: Ga Bard	Respond to of 9440

No Problem ... That is what this thread is for. GB

To: Rob D. who wrote (1026)	4/30/1998 10:58:00 PM
From: TraderGreg	Read Replies (4) \| Respond to of 9440

Not to confuse you, but I'd like to add one that I use: PEG which is the P/E ratio divided by the Growth rate in Earnings. What I like about the PEG is it helps explain why some types of stock sectors are afforded higher growth rates than other sectors. PEGs less than one are usually great buys. A PEG of 1 means the stock's P/E is the same as its growth rate, kind of neutral. But a stock with a P/E of 10 but a growth rate of 30% a year is considered undervalued because earnings are growing much faster than the P/E would indicate. It's PEG is 1/3 , which is usually a screaming buy. TG