Originally posted by 64eheh
gees, Thanky, that's a dinner party conversation, not a quick post, but i'll give it a go...........
depends on where you get the PE and sunsequent PEG ratios from. Is it a computer generated number, or a analysts that thinks like a computer and simply works out the Pe from the last financial report and simply calculates the forward growth based on some averaging of the previous years, projected forward.......OR, is it from a well respected analysts coverage of the latest companies operations.
PE and PEG are lagging indicators. Say, as an extreme example, a company announces a new contract/a new geographical market/ new product or whatever. Are you going to wait 3-6 months for the financials to come out, or, are you going to figure out where the company is likely to head now. The market will.
The other thing about PEG, is that different investors in different countries and time frames will have a greater or lessor enthusiasm (hype appeal) than others. an extreme example again, but go back 130 years and you will find railways and steelworks were the hyped stocks on world exchanges. Now, as we know, it's tech stocks. It's a hot sector, as opposed to steel works and railways, which excite no one now. You get the drift.
That's the beauty of technical analysis. It captures not only the fundalmental value of a company, but, for me, the markets enthusiasm for that stock, which changes over time. Thats' what pure fundalmental analyst don't get....the hype.
And we all know that many of these companies get pushed to extreme values before falling back to reality. That's why i mainly ignore P/E's and other indicators and just use charting.
(At least with the big companies, as they are well covered by the analysts and the market. It's my little micro-cap companies, like KOR, that require my time in analysis.
hope this reads well, as i'm not going back to edit.
Morning 64 thank you for taking the time to respond in some detail. Agree it is a potentially lengthy discussion item.
You raise several pertinent points that have caused some reflection.
When considering PEG I login to Commbank and see what forward estimates for EPS are / EPS growth and then consider what the PEG ratio is currently and anticipated in future years. I believe Commbank obtains this data from Morning Star but perhaps its a collection of multiple views - not entirely sure. This reflection alone is enough for me to rethink its utility, as in who's opinions and data am I relying on for this sort of analysis.
I hadn't thought about putting current PEG ratios in context with industry averages or considering historical comparisons, that again shows significant variability.
I do see how charting helps avoid noise and relies on the opinions of the masses. On the TNE front I was stopped out for a small lost in the 6.50s, so probably a cheap lesson really. I'm spending a bit of time learning Amibroker and working to think more systematically. I think there's a place for FA to blend with this approach but leaving that for the future.
(20min delay)
