Cablevision also has a PEG ratio of 0.9 and a dividend yield of 1.5%.
The PEG ratio makes no assumption for how the business or you reinvest earnings.
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Okay, so now that we have our PEG ratio, 0.76, what does it mean?
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Moreover, its PEG ratio is 1, based on a 5-year earnings growth rate of 13.4%.
Therefore, to Peter Lynch, at fair value, the PEG ratio of a growth company should be 1.
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Moreover, the PEG ratio of 1.1, though seemingly overvalued, is less than the 2.2 similar firms offer.
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And its PEG ratio is just 0.4 based on a consensus 5-year EPS growth rate of 21%.
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So I could have got by with a growth rate below 30% and a PEG ratio below 2.00.
Diageo trades at 14.5 times earnings, sports a 2.5% dividend yield, and trades at a PEG ratio of 1.73.
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The reason Quality Systems does not get the Lynch strategy's highest grade is because its PEG ratio is 0.81.
That makes for a 0.72 PEG ratio, which is part of why it gets high marks from my Lynch-based model.
But here is where we bump up against my point: the fallacy of the PEG ratio as a valuation measure.
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The company trades at 14.3 times 2012 earnings, sports a 1.5% dividend yield, and trades at a PEG ratio of 1.15.
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Valuation at XTO is compelling, with the stock trading at a 0.68 PEG ratio and at 10.9 times forecasted 2007 earnings.
"This low PEG ratio falls into the best-case category on one of my Lynch-based model's most important tests, " points out Reese.
Very importantly, the PEG ratio treats all 0.76x ratios as being the same , when in fact they are very different.
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The PEG ratio also comes in at 0.60, a 40% discount to the benchmark of 1 for a fairly priced stock.
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The PEG ratio, slightly under 1, tells me the stock will clearly outperform the market for at least three to five years.
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This measure, popular with growth-stock fans, is often called the PEG ratio.
The PEG ratio for the stock is 0.71, based on a 3- to 5- year earnings per share growth rate of 15%.
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The wider the audience and greater demand for Apple stock, the closer the stock can come to parity with its PEG ratio.
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Anyone comfortable with these unspectacular assumptions should be willing to accept the 17.5% growth-rate target, which would make the 1.15 PEG ratio legitimate.
True to its name, Extreme Networks (nasdaq: EXTR - news - people) sports a 2001 PEG ratio greater than 10.
The latter means that when I bought the stock, I was getting a PEG ratio of 1.00 which, from a value standpoint, is fine.
Conversely, if the PEG ratio is less than 1.0 it means that a business is fairly valued, and in fact, trading at a discount.
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Valuation compared to its projected five-year growth rate is also modest: Limited's PEG ratio (price-to-earnings ratio divided by long-term growth rate of 15%) is 0.96.
The way Reese calculates the price-to-earnings-to-growth (PEG) ratio based on an average of historical, current and projected growth rates, AEO has a 0.33 PEG ratio.
Apple trades for 15.2 times expected 2012 earnings and analysts figure on a 5-year EPS growth rate of 22.5%, giving it a PEG ratio of 0.67.
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Dell is looking a bit pricey at 25.6 times current year earnings, although the PEG ratio of 1.08 suggests shares might still be on the cheap side.
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