Comments on: “Recession-Proof Business Poised for 100% Gains” Motley Fool

By: IJ Alves

IJ Alves — Tue, 20 Jan 2009 15:36:17 +0000

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By: Don X

Don X — Sat, 22 Nov 2008 15:43:56 +0000

I think most stock gurus think it is best to buy stocks with a PEG of 1.00 or below. Right now, though, it is hard to predict future growth.

By: who noze

who noze — Thu, 20 Nov 2008 01:56:13 +0000

this was a takeover many years ago when shearson hamil was floiundering in fact bershad was from sh hamil . they took away the former exs. airplane they then had a reerse split severaql yrs later hey did a 3=2 forward split and its been dgoinup mever since unfortunately names and dates escape me

By: StockGumshoe

StockGumshoe — Wed, 19 Nov 2008 22:08:50 +0000

Welcome Melanie. The popularity of the PEG ratio in the popular consciousness traces back to Peter Lynch, who advocated searching for stocks whose growth rate is at or near (or above) it’s Price/Earnings ratio. That’s not because it’s magical, it’s just a convenient way of assessing a stock’s value versus its growth rate.

Here’s the short version:

The price is the price of the stock, the earnings is the total profit of the company divided by the number of shares — so the PE ratio is the price divided by the profits. All else being equal, you would want this to be low — better to pay $1 for 20 cents in annual profits than to pay $1 for 3 cents in annual profits.

The PEG ratio just puts another number in there that attempts to look at the future, which is a way to justify purchasing high growth stocks even if they trade at a higher multiple of current earnings.

That means if you have a stock that trades for $1 and has 20 cents in earnings, and is growing earnings at 4% per year, the PEG ratio is 1.25 — that’s a PE ratio of 5 divided by growth of 4%.

If you have a stock that trades for $1 and has 5 cents in earnings this year, and is growing profits at 40% a year, you have a PEG ratio of .5 — that’s a PE ratio of 20 divided by a growth rate of 40.

There’s no magic, it’s just shorthand that people use to make a quick assessment of a stock’s value. And it’s a little tough to use right now, since it seems like pretty much everything is a “value” stock at the moment, and a value stock with lead boots at that.

By: StockGumshoe

StockGumshoe — Wed, 19 Nov 2008 21:25:40 +0000

Haven’t looked at all at this company since I wrote about them last year, though it looks like they’ve had a rough time of it. The original note is here, by the way, sorry it didn’t show in the search:

http://www.stockgumshoe.com/2007/11/army-of-bees-hunting-bin-laden.html