We are in the middle of the great Information Revolution and some companies have to make sense out of all the data in the world and make it useful to the end user.
Google (GOOG) is an obvious play and so is Yahoo (YHOO).
GOOG is the one which is most likely a better investment.
GOOG has a forward PE of 32, 5 year growth rate of 34.4% for a Price to Earnings Growth Rate Ratio (PEG) of a very low 0.93 (under 1 is very cheap, over 2 is overvalued).
Ignore the actual price of the stock (GOOG is close to $700), and pay more attention to the other measures of valuation.
YHOO (Yahoo) has a forward PE of 42.63 and a 5 year estimate growth rate of 25.4% for a PEG of 1.70.
The PEG of Yahoo (YHOO) is still under 2, but Google (GOOG) is still a great value and worth investing in.
Showing posts with label valuation. Show all posts
Showing posts with label valuation. Show all posts
Wednesday, December 19, 2007
Tuesday, September 25, 2007
Growth Stock Valuation (September 25, 2007)
Growth Stocks such as Apple (AAPL) and Google (GOOG) have been doing well and have recently reached their 52 week or all time highs. But when are these growth stocks overvalued?
One rule of thumb that is very useful with stocks (especially growth stocks) is to use the PEG ratio, or the Forward Price Earnings ratio divided by the 5 year estimated growth. A PEG ratio over 2 is considered overvalued, and a PEG ratio under 1 is considered very cheap.
Table of Selected Growth Stocks
Here are a few growth stocks with different PEG ratios. Data from Yahoo Finance, Tuesday, September 25, 2007:
Chart of Growth Stocks
Here's a Chart of the different growth stocks sorted by PEG. In the graph, PEG is multiplied by 20. So an adjusted PEG of 15 means PEG is 15/20 or 0.75:
One rule of thumb that is very useful with stocks (especially growth stocks) is to use the PEG ratio, or the Forward Price Earnings ratio divided by the 5 year estimated growth. A PEG ratio over 2 is considered overvalued, and a PEG ratio under 1 is considered very cheap.
Table of Selected Growth Stocks
Here are a few growth stocks with different PEG ratios. Data from Yahoo Finance, Tuesday, September 25, 2007:
| Symbol | Stock Name | PEG | Forward PE | 5 yr growth |
|---|---|---|---|---|
| AMX | America Movil | 0.46 | 15.12 | 32.65% |
| HRS | Harris | 0.56 | 15.17 | 27% |
| TDG | Transdigm Group | 0.65 | 18.58 | 28.50% |
| HANS | Hansen | 0.66 | 25.74 | 39.09% |
| WBD | Wimm Bill Dann | 0.67 | 23.53 | 35.00% |
| SNDA | Shanda Interactive | 0.71 | 20.73 | 29.39% |
| ABB | ABB | 0.78 | 19.43 | 25.00% |
| GOOG | 0.87 | 29.13 | 33.65% | |
| CROX | Crox | 0.96 | 25.55 | 26.57% |
| RIMM | Research in Motion | 1.12 | 34.46 | 30.82% |
| CSCO | Cisco | 1.15 | 17.73 | 15.43% |
| JSDA | Jones Soda | 1.15 | 42.77 | 37.07% |
| ISRG | Intuitive Surgical | 1.35 | 54.20 | 40.05% |
| GME | Gamestop | 1.40 | 29.10 | 20.75% |
| AAPL | Apple | 1.46 | 34.66 | 23.67% |
| BIDU | Baidu | 1.48 | 81.06 | 54.60% |
| GRMN | Garmin | 1.56 | 30.15 | 19.38% |
| NVT | Navteq | 1.69 | 39.81 | 23.49% |
| YHOO | Yahoo | 1.99 | 48.20 | 24.19% |
| AMZN | Amazon.com | 2.59 | 60.70 | 23.42% |
Chart of Growth Stocks
Here's a Chart of the different growth stocks sorted by PEG. In the graph, PEG is multiplied by 20. So an adjusted PEG of 15 means PEG is 15/20 or 0.75:
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