A ratio to help you uncover shares that could multiply your money many times over

Julie Brownlee, Fsp Invest, 12 May. 2014

Tags: ratio, shares, peg ratio, peg, price earnings growth ratio, stocks, how to find bargain stocks, how to find growth stocks, calculating peg



If you could uncover shares in companies that were small, growing and profitable, you could be onto the next big thing. So how can you find shares like this? According to renowned investor Jim Slater, you can find this out by using the price earnings to growth ratio (PEG ratio). Let’s take a closer look at how this works…



*******************************************
Get your hands on the best deal in the entire publishing industry

This is your opportunity to grab nearly all of FSP Invest’s research services for as long as you want… And get paid R27,414 to do it.

That’s right.

You can get a lifetime of our fast-paced trading research services, stock advisory newsletters, and other independent research AND cold hard cash in your bank account…

BUT only if you join this elite group of investors before the 30th of May 2014.

Find out how to get in on this incredible offer here.
*******************************************

Try to unearth a bargain with the PEG ratio


When you come across a share that looks like it has great potential, how can you see if it’s a bargain or not? You use the PEG ratio.

For example, you find a share with a price earnings (PE) ratio of 30. The higher a PE, the higher the market’s expectation that the company will grow quickly, Tim Bennett in Money Week explains.

But with a high PE, how do you know if the company is cheap or not. Slater thinks it all comes down to comparing the PE with the rate the company’s earnings are growing. This is the PEG ratio.

If profits rose 20%, the PEG would be as follows:

PEG = 30/20 = 1.67.

*******************************************
Want to know the secrets to building a million rand portfolio?

If you’ve struggled to build up wealth for years and never achieved the impressive market returns you’ve dreamed of, I’ll help you change that – in a big way.

Attend FSP Invest’s Accelerated Investor Pro Live event with me, Warren Jeffery on the 17th of May 2014 and discover everything you need to build your first R1 million portfolio!

Click here to discover how easy it is for YOU to become a fully-fledged millionaire!
*******************************************


Using the PEG ratio to find ‘cheap’ stocks


This PEG suggests that the company isn’t cheap. Fans of the PEG ratio believe that the earnings growth rate should match the PE. For instance, a company on a PE of 20 should grow earnings at 20%.

So if you’re looking for a bargain, you need to find a company with a PEG ratio of less than 1.

For example, say a company is growing its earnings 20% a year. It’s trading on a PE of 15. Its PEG is 0.75 (15/20). This makes the company look like a bargain as the growth rate is higher than what the PE suggests it should be.

To calculate a company’s PEG, you can get the PE ratio and earnings growth from many financial websites, such as Bloomberg. Bloomberg provides a PEG ratio too.

So there you have it, a ratio to help you uncover shares that could multiply your money many times over.


Related QA

Pic
d.c.heger asked:
MY QUESTION IS – I bought Bitcoin & Etherium some time ago – at first they grew nicely but now they are lower than what I paid for them. Should I [read more]
Published at 04 Apr. 2018 in: Investing 5 shares due to rocket 1 Answer
Pic
kavesh.maharaj.73 asked:
Hi Josh. I would like some advice on TFSA. I can get an interest rate of 7.8% nominal at a bank if I invest the R33k upfront in a fixed deposit [read more]
Published at 19 Mar. 2018 in: Investing Tax free savings vehicle 2 answers
Pic
kavesh.maharaj.73 asked:
Hi Josh Quantum wants to buy back shares from shall investors at what I think is a low price of around R3.86. You tipped the share in February [read more]
Published at 14 Mar. 2018 in: Investing Real wealth 5 answers
Pic
elizastrydom asked:
Hi Timon I am interested in registering for your Red Hot Storm Trader service. I am already a Red Hot Penny Shares investor. My question is [read more]
Published at 28 Feb. 2018 in: Investing Trading platform and broker 1 Answer
Pic
ManuE asked:
I have an interest in investing in Bitcoin, I just don't know how. If I buy Bitcoin with R15 000, how much can make (Return On Investment)? [read more]
Published at 25 Feb. 2018 in: Investing Investment 1 Answer

Related articles:


Latest:

Comments
0 comments