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Author: KenN513 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2003  
Subject: PEG on ERES Date: 7/11/2007 1:10 AM
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I use the stock screener on Yahoo to find (what i hope are) under-valued stocks. One of my criteria is a low PEG. So I uncovered a stock called eResearchTechnology Inc. (ERES) with a PEG of .70. I got curious how the PEG is caculated, so i went back to Fool School to learn how this ratio is calcualted. Here's how i did it:

I looked up the P/E on Yahoo. ttm P/E is 60.24. Forward P/E is 27.35. The way I understand it, I should be using the trailing P/E. Correct?

On the same page I got the Diluted EPS (ttm) of .17. Then I went to analyst estimate and got estimated earnings (12/08) of .37. This is seven quarters away. So i raised .37/.17 to the 4/7 power to get 1.56. So the growth rate is 56% per annum. Following me?

Now Fool School tells me to divide the P/E by the growth: 60.24/56 is 1.08. ??? !!! ???
There is a HUGE difference between .7 reported by Yahoo and 1.08 that I just calculated! The difference is tobuy or not to buy! Especially on a small cap like ERES.

Can anyone tell me if i made a mistake in my calculation (I've gotten the same result 3 times in a row), or if Yahoo's number is has some other meaning? Yahoo's number does say "PEG Ratio (5 yr expected):", so perhaps it is less meaningful?

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