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URL:  https://boards.fool.com/the-way-i-look-at-it-is-that-the-piv-gives-an-idea-25103082.aspx

Subject:  Re: What's Your Portfolio's PIV-ER? Date:  1/30/2007  12:17 AM
Author:  TMFSlydo Number:  1268 of 1817

The way I look at it is that the PIV gives an idea of the margin of safety, while the ER gives an idea of the return one could expect if the price suddenly reverted to its intrinsic value. In a way, they're two sides of the same coin, but giving different perspectives. To be sure, one will always go up as the other goes down. But while they're inversely related, it's not a simple proportional relationship where they move in opposite but equal directions (at least to my mathematically untrained eye). Here's a hypothetical scenario:

Current
Price IV PIV ER
----- --- ----- -----
150 100 150.0% -33.3%
140 100 140.0% -28.6%
130 100 130.0% -23.1%
120 100 120.0% -16.7%
110 100 110.0% -9.1%
100 100 100.0% 0.0%
90 100 90.0% 11.1%
80 100 80.0% 25.0%
70 100 70.0% 42.9%
60 100 60.0% 66.7%
50 100 50.0% 100.0%

I think both serve a useful purpose.

Paul
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