valuations

PE measures growth. If a company has a PE of 5, the market is only expecting it to grow at 5%
If a company has a PE of 20, it is expected to grow at 20%.
PEG measures a companies PE and compares it to its growth forecast. Theoretically a PE should equal its growth rate or be 1. If the ratio is less than 1 the company may be undervalued. If it is higher than it is over valued.
Jim Slater says the ideal range should be between .5 and .75

BOL's PE is 10.47
Forecast growth is 14.5%
PEG = .7
BOL would therefore be considered undervalued.

There are three reasons for this
1. sentiment toward the construction industry
2. subprime finances and prospect of higher interest rates.
3. cyclonic conditions in Queensland and WA.
However
a) LEI and a recent survey show that construction is on the way up.
b) we are on the verge of finding out if the us is about to go into recession - some say there is a one 1 in 3 chance others say 40% likelihood of it happening.
In any case, due to extremely high cash flow BOL will probably not be impacted by higher interest rates.
c) Cyclonic conditions are more than a one off situation.
So what do you think - a gamble?