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INDUSTRY AND SECTOR / IND AGGREGATE FACTORS / VALUATION
PEGLTInd
Full Description


Price to Earnings Growth or PEG is a simple valuation rule of thumb. It states: "The p/e ratio of any company that's fairly priced will equal its growth rate." A value less than 1.0 might reflect potentially undervalued companies and a value greater than 1.0 would result in potentially overvalued companies.

We have four version of PEG

PEGLT - uses long term growth rates
PEGLTY - uses long term growth rates and includes Yied
PEGST - uses short term growth rates
PEGSTY - uses short term growth rates and includes Yield

Long Term
This is the more widely used PEG ratio. It is calculated by dividing the projected PE over the next twelve months by the analysts long growth rate estimates.

PEGLT = ProjPENTM / LTGrthMean
PEGLTY = ProjPENTM / (LTGrthMean + Yield)

Short Term

This version uses the past 12 months earnings (EPSExclXorTTM) and next year's EPS consensus estimate (NextFYEPSMean) to calculate the growth rate. Since it only looks up to 2 years ahead it has the potential to be more precise. However since earnings can be highly manipulated, this PEG variation can be more volatile

PEGST = PEExclXorTTM / stg
PEGSTY = PEExclXorTTM / ( stg + Yield )

stg = gr%(NextFYEPSMean , EPSExclXorTTM, y_till_ny ))

y_till_ny = EvalQtrComplete=4, 2 , 2 - QtrComplete * 0.25)