Message Font: Serif | Sans-Serif
No. of Recommendations: 0
One thing I've noticed about PEGs and YPEGs is they can vary enormously based on which EPS number and which growth rate you use. I purchase a lot of depressed small-cap stocks which often have losses and in which quarterly earnings can vary widely.

I sometimes run several PEGs in order to get one which I feel is most representative. I'd like to hear any opinions on the wisdom of the following:

(a) Using the revenue growth rate instead of earnings growth. Usually revenue growth is more stable and should provide a more conservative number. Also, companies coming out of financial troubles or just turning the profitability corner often show unsustainable earnings growth. In the long run, I would think revenue growth = earnings growth.

(b) For companies with recent losses and/or EPS figues that jump around from quarter to quarter, why not cut a regression line over the past 4 quarters (or more if possible) and use the slope as the growth rate? Most spreadsheets have statistical functions which would make this pretty easy.

(c) What about doing a PEG based on each of the past quaterly EPS and using this as a range for what values to expect in the future? (As you can tell, I tend to be more comfortable with more data points.)


Jack Neefus
College Park, MD
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.