MarketWatch

[dr.abrahamb]

Originally Posted by Vincenta11

Hello everyone,

I am new to fundamental analysis of stocks and I would want to know;

How important a matrix is PEG and which is the best formular to calculate the Annual Growth Rate of PAT.

Thanks.

PEG is very very important. Sometimes you might have a very high-priced value company with a high PE. You might be making a wrong decision to stay away because of its high PE (relative to market average), but this company might have just entered a growth spurt that dwarfs the average annual growth rate in its sector; its only the PEG that will 'tangibly' bring that fact out to you in a very simple way.

I know just a very simple formula:
Present annual PAT minus Previous annual PAT 'all over' Previous annual PAT.

NB: Use a 3 - 5 year average, and not just figures for a single year. Use absolute figures obtained from your calculation e.g P/E of 10 over AGR of 20% gives a PEG of 0.5 only. Please note that there are cases where Operational Profit will serve you better than PAT in calculating AGR for the purposes of estimating PEG e.g. comparing DangCem and Older Cement companies. Which other formulae do you know?

[Vincenta11]

Originally Posted by dr.abrahamb

PEG is very very important. Sometimes you might have a very high-priced value company with a high PE. You might be making a wrong decision to stay away because of its high PE (relative to market average), but this company might have just entered a growth spurt that dwarfs the average annual growth rate in its sector; its only the PEG that will 'tangibly' bring that fact out to you in a very simple way.

I know just a very simple formula:
Present annual PAT minus Previous annual PAT 'all over' Previous annual PAT.

NB: Use a 3 - 5 year average, and not just figures for a single year. Use absolute figures obtained from your calculation e.g P/E of 10 over AGR of 20% gives a PEG of 0.5 only. Please note that there are cases where Operational Profit will serve you better than PAT in calculating AGR for the purposes of estimating PEG e.g. comparing DangCem and Older Cement companies. Which other formulae do you know?

Thanks a million for your quick reply and it was quite revealing.

For the simple formula you suggested, I ask;

Since you are looking at a, say 5-year period, would applying your formular mean; PAT in the fifth year(i.e latest PAT) minus PAT in the first year all over PAT in the first year multiplied by 100(to get a percentage), and everything divided by 4.

OR

Should I get the yearly growth rates; from year 1 to 2, 2 to 3, 3 to 4 and 4 to 5. Then I add all the yearly growth rates and divide by 4 to get the average.

With the second approach, what happens if there was a negative growth rate in one of the periods, i.e, instead of an increase there is a decrease in PAT.

Moreover, if I remember my elementary mathematics very well, all of the above is looking at a linear annual growth rate.

There could be a compound annual growth rate and I stumbled on a formula for this as;

AAGR=n root of (PAT in fifth year/PAT in first year) minus 1 then multiply by 100 to get the percentage. Where n=period and in this case 4.

[goldsun]

Originally Posted by dr.abrahamb

PEG is very very important. Sometimes you might have a very high-priced value company with a high PE. You might be making a wrong decision to stay away because of its high PE (relative to market average), but this company might have just entered a growth spurt that dwarfs the average annual growth rate in its sector; its only the PEG that will 'tangibly' bring that fact out to you in a very simple way.

I know just a very simple formula:
Present annual PAT minus Previous annual PAT 'all over' Previous annual PAT.

NB: Use a 3 - 5 year average, and not just figures for a single year. Use absolute figures obtained from your calculation e.g P/E of 10 over AGR of 20% gives a PEG of 0.5 only. Please note that there are cases where Operational Profit will serve you better than PAT in calculating AGR for the purposes of estimating PEG e.g. comparing DangCem and Older Cement companies. Which other formulae do you know?

I read that PEG of 1 mean the stock is fairly priced and below one mean its undervalued. how less <1 is desirable

[Born 2be rich]

Index Closes Lower Despite More Market-making Stocks


http://www.thisdaylive.com/articles/...stocks/131078/

[dr.abrahamb]

Originally Posted by goldsun

I read that PEG of 1 mean the stock is fairly priced and below one mean its undervalued. how less <1 is desirable

It helps you weigh side by side both growth and value in one company, but it also helps you weigh among two companies which will give you more of growth or value, depending on what you are looking for.

[Oracle]

Originally Posted by dr.abrahamb

It helps you weigh side by side both growth and value in one company, but it also helps you weigh among two companies which will give you more of growth or value, depending on what you are looking for.

Welcome back bro!

[yemo]

Market Orders 19 Nov 2012

[dr dowell]

Originally Posted by yemo

Market Orders 19 Nov 2012

Oga Yemo, may God.bless you for these market order/ bid and offer list. We appreciate you effort. Thank you.

[hispy99]

SEC, Stakeholders Hold Retreat on Market Growth, Articles | THISDAY LIVE

[Born 2be rich]

This will be very useful guys.

So Which Bank Stock are you investing in today? - Proshare

[yemo]

Originally Posted by dr dowell

Oga Yemo, may God.bless you for these market order/ bid and offer list. We appreciate you effort. Thank you.

Let me know if there's a particular stock that you are tracking that is not on the list as the list seems a bit short in comparison to what it used to be.

Thanks

[dr dowell]

Originally Posted by yemo

Let me know if there's a particular stock that you are tracking that is not on the list as the list seems a bit short in comparison to what it used to be.

Thanks

Thanks Oga Yemo. The list is enough for now. I appreciate.

[knightofdelta]

Originally Posted by Born 2be rich

This will be very useful guys.

So Which Bank Stock are you investing in today? - Proshare

This analysis is kinda weak. The earnings yield is just the inverse of PE ratio and if you are using only PE to make an investment decision in the banking industry, get ready to be messed up by Mr Market.

[waaan5]

Originally Posted by knightofdelta

This analysis is kinda weak. The earnings yield is just the inverse of PE ratio and if you are using only PE to make an investment decision in the banking industry, get ready to be messed up by Mr Market.

True. But, the PE is a strong tool of the fundamentalist. Maybe it is telling the current valuation of the banks?

[nosa2]

Originally Posted by knightofdelta

This analysis is kinda weak. The earnings yield is just the inverse of PE ratio and if you are using only PE to make an investment decision in the banking industry, get ready to be messed up by Mr Market.

Originally Posted by waaan5

True. But, the PE is a strong tool of the fundamentalist. Maybe it is telling the current valuation of the banks?

Actually I disagree with KOD, While it might be a bit elementary to use only the p.e to analyze banking stocks it is actually a very efficient tool and using it alone would ensure that, barring for fraud, one would at least avoid catastrophe.

[afolabi27]

Originally Posted by Born 2be rich

This will be very useful guys.

So Which Bank Stock are you investing in today? - Proshare

Originally Posted by knightofdelta

This analysis is kinda weak. The earnings yield is just the inverse of PE ratio and if you are using only PE to make an investment decision in the banking industry, get ready to be messed up by Mr Market.

Originally Posted by waaan5

True. But, the PE is a strong tool of the fundamentalist. Maybe it is telling the current valuation of the banks?

Originally Posted by nosa2

Actually I disagree with KOD, While it might be a bit elementary to use only the p.e to analyze banking stocks it is actually a very efficient tool and using it alone would ensure that, barring for fraud, one would at least avoid catastrophe.

...well, from what I have learnt from all of you on this forum, no single metric is sufficient to form a good opinion. Better if we combine 2,3 or more to be safe from Mr Market.

Oga Nosa, I like your caveat with P/E ratio, that "barring for fraud or accounting shenanigan" is the danger.

I also like the P/B and the ROE alongside the PE as tools of the fundamentalist.

[yemo]

Originally Posted by dr dowell

Thanks Oga Yemo. The list is enough for now. I appreciate.

Ok. Orders for 20 Nov 2012

[knightofdelta]

Originally Posted by nosa2

Actually I disagree with KOD, While it might be a bit elementary to use only the p.e to analyze banking stocks it is actually a very efficient tool and using it alone would ensure that, barring for fraud, one would at least avoid catastrophe.

Ever wondered why Fidelity bank and Skye bank have always lagged in price despite very low PEs?

[pegheneji]

Originally Posted by knightofdelta

Ever wondered why Fidelity bank and Skye bank have always lagged in price despite very low PEs?

this no be the first time you dey use fidelity to ask this type of question, yet no one including has said the reason?

[nosa2]

Originally Posted by pegheneji

this no be the first time you dey use fidelity to ask this type of question, yet no one including has said the reason?

Fidelity is a very inefficient bank