1YPEG - A Bit Of Perspective

There’s been a lot of recent excitement posted on this board over 1YPEG as a financial indicator. It appears that at least some folks are pretty much willing to let the value of 1YPEG drive buy/sell decision process.

This post is not intended to be a “wet blanket”, but I think maybe a little perspective might be in order.

Not too long ago there was a thread on this board about Cognex (CGNX). Referring to Kevin’s spreadsheet, CGNX sports a 1YPEG of .55, not quite low enough to paint the cell green, but low enough to warrant attention. A bit more investigation reveals a debt burden if $0 and $178M cash. Despite the good financial news, the conclusion of the CGNX thread was that the company did not represent a very good investment opportunity.

How so?

It turns out that there is nothing about the vision systems sold by Cognex that brings the customer back for more - more product, more replacement parts, more services, more consultations, more anything. Every sale is like the last house on a dead end street.

The point being that a low 1YPEG does not constitute sufficient information for making the decision to buy or sell a company. It’s a useful data point. It serves as factor worthy of consideration when one is in the process of an investment evaluation. But I am suggesting that you should be cautious about assigning too much gravity to this singular indicator.


If you change the word from “drive buy/sell” to influence buy/sell, you might have it right.

It’s one thing to talk about buying and selling and another to do it. I find that talking abut things really helps me solidify and further examine my thinking about them. :slight_smile:


I might move out of Broadridge, but 1YPEG is one of the considerations. Everything I’ve mentioned shuffling around I’ve already been thinking of shuffling around, and 1YPEG is reinforcing some of my existing inclinations.