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$68.33 altium limited

ALU's Trailing PE = 70, page-6

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zwu

2,452 Posts.

9

23/02/18

15:33

Post #: 31295134
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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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So it meant to be conservative, when I said it's 50% over-valued.

ALU Price at posting: $19.99 Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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