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To: Chuzzlewit who wrote (57)	2/2/1999 4:40:00 PM
From: Joe E.	Read Replies (2) \| Respond to of 419

Well, I have a couple of comments and you might see them as criticisms, I suppose, since these measurements are your babies. I am a little uneasy about the use of the betas. If a high beta is correlated with a high volatility, which it generally is, then the high beta should be associated with a lower P/E. On the general use of PEG ratios, consider these two stocks growing $1 in earnings (or think cash flow) at different rates for ten years: Stock A at 15% and Stock B at 65%. I am going to discount to Present Value each year's earnings at 10%, and add them up. (no mid year adjustments or subsequent annuity, for simplicity) Stock A yrs 1,2,3,4,5,6,7,8,9,10 cash: 1.15, 1.32, 1.52, 1.75 +5 more in this series, worth PV 1.05, 1.09, 1.14, 1.20, etc. Stock A sum of ten years PV's is $12.87 and is for this example the stock price "P/E" is 12.8 "YPEG" is .75 (I simplified P/E and YPEG to make my point) Stock B yrs 1-10, cash: 1.65, 2.72, 4.49 etc. PV of each year is 1.50, 2.25, 3.38 etc. Stock B sum of ten years is $170.00 Stock "P/E" is 170, "YPEG" is 1.60 Without judging the stocks, since these are just mathematical examples, you can see that the YPEG grows as the growth rate grows. YPEG works OK with smaller growth rates, but the high ones make it not work so well. These are just comments.