Value P/E's n PEG Ratio's

IF I calculate the NPAT as a percentage from year to year and average it over the x amount of years, obviously from their annual report. I would come to a average growth as a Percent yearly...

Then doing the same for the P/E ratio of the same period would yield a similar result.

Dividing the average P/E over the average NPAT% would give me the historical average PEG of years.

Further more I could do the same again but go from the current P/E to the forecast growth or last years NPAT x average growth over last 3 years or say 5%

Going Technical, Then finding the value on the charts in the 1-3 months and buying in on the Support line? Which alters the initial P/E but puts you in the now.....

Sound like an intelligent strategy ?

I personally find pricing forecasting into a target dicey because:

• It's a forceast, not a result
• The market will also price a forecast in
• Forecast's can be revised / altered quite easily

The way you talk about NPAT growth I don't think is quite correct though, to get the growth you need to calculate it using the previous years results, not just average NPAT out, ie:

100 * (This Years NPAT - Last Years NPAT) / Last Years NPAT = Growth in NPAT.

I also like to inflate last years actual earnings number's, if they aren't beating inflation then the company is not really growing.

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Ok, thanks.. something to have a look at....

I believe PE's are about as accurate as the capital reserves in banks. The dividend yield is the only way to value the broad market and the US SPX is yielding around 2% and falling. True income in stocks expands no more than 1% over inflation over the long run, so holding the entire S&P you are priced to return risk free at best. The danger in holding stocks at elevated valations is the discount is forever and merely a 1% move on the dividend would erase 33% of the value of the portfolio. On a real basis, it takes a long time to get back 33%.