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Horrible analysis. People should learn how to do analysis before...

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Dovif

1,915 Posts.

67

26/02/18

20:52

Post #: 31359928
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Originally posted by zwu ↑

To value a high growth stock, widely used is the PEG ratio indicator, which is, namely, the ratio of PE/Growth-rate. As a rule of thumb, if PEG>1, it's over valued; if PEG<1, it's under valued; and if PEG=1 it's just right.

(See for example - https://en.wikipedia.org/wiki/PEG_ratio)

Now ALU's PE=70+x,

(1) if its earnings Growth rate = 50%, then PEG=70+/50 = 1.4x, 40% over valued;

(2) if its earnings Growth rate = 25%, then PEG=70+/25 = 2.8x, 180% over valued;

(3) If as said in the above post,

"... (prior to the result) the 2018 forward PE was 39.2x ... the 2020 forward PE was 22.6x"

then the Growth rate in the 2 years between 2018-2020 will be

(39.2/22.6)^^0.5 -1 = 31.7% p.a.

so PEG = 70/31.7 = 221%, 121% over valued.

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Horrible analysis. People should learn how to do analysis before posting. If you are using today’s prices (post 50% growth) against 2017 earnings. All high growth company would look too expensive. It is like ignoring 1/2 of BHPs profit and saying it is expensive because it is trading at 22x earning

ALU Price at posting: $19.87 Sentiment: Hold Disclosure: Held
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0 Great analysis

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