I originally put this sheet together as a vehicle to view of all my positions (and potential positions) and compare their 1YPEG with one another. Since learning about the 1YPEG approach I wanted to see where my current holdings lined up with the Saul way of thinking. I also invited anyone who would like to use this sheet for their own holdings and/or analysis. A big thank you to those who filled in entries to stocks I hadn’t gotten to yet. Coming back in later to see more completed 1YPEG calcs has been a real nice surprise.
New to the spreadsheet is a second revenue sheet based on feedback provided in the last discussion thread. The second sheet follows the same computational model as the EPS calc sheet - chiefly it calculates the YoY revenue growth, the P/S ratio (a formula that uses current-day pricing and current-day shares from a google finance function), and then something I rigged together called the 1YPSG. By no means do I sanction this last column as a decision-making metric. Rather, I wanted to see if there were any patterns that emerged when looking at the stocks together. It may be useful, it may not - I welcome a discussion around it.
I also added a column for notes, comments, corrections, etc. I tried to add a little color commentary for the eye catching stocks. Some of these comments have been filled by other board members and viewers of the sheet as well. Comments are always welcome.
Last, some thoughts. The work put into this sheet and its calcs has been a real eye opener for me. The information gave me an impartial view of any stock’s growth qualities and liberated me to set it free (without regrets) when I found a higher growth prospect alternative. I’ve let go of quite a few positions in the past week that have been very good to me in the past, but alas their real contributions probably concluded months or years ago and I did not seem to notice. This view of my stocks really got me to notice.
There are still some empty rows for stocks that do not have EPS or rev entries. These were put in by other board members and viewers. If you’re interested in filling in those details to see how they compare with the other stocks in the list please feel free to continue to use the sheet as such. There’s a lot more to compare with now.
What are some of the companies you have bailed out on? I understand the problem, being the holder of a large portfolio myself. It is easy to have a stock run up very nicely, the drift back downward over years because you aren’t paying good attention to it. It can still be up substantially overall, even after years of under-performance. But if it was sold (or partially sold) when the growth prospects compared to the price deteriorated, the funds could have been put into something with fresher good prospects.
It would be interesting to add a column to your spreadsheet regarding YoY stock price appreciation/depreciation.
I assume that part of the premise of the analysis is that you want to own stocks that will appreciate and you believe that the 1ypeg will help you identify stocks worth holding.
That being the case, one would then hypothesize that the stocks with the lowest 1ypeg would appreciate more than those with higher 1ypeg.
As you track your portfolio in this manner, you will get feedback on whether your holds and sales were served well by this "saul"indicator.
I quickly added a column on the sheet “What I did” to show what has been done or what I am considering. Most of the stocks I’m considering for sale will be sold in the near term. Some after I move past short term to long term for the gains; others as I find better places for the cash.
I also started some new entry positions where I marked “added”. Some, I must admit were because it was what Saul was doing. After putting this spreadsheet together I know better not to do that. For example, it became more apparent CELG and WAB don’t really fit the Saul mold on the three-factor test and were probably used as a place to park cash for that inevitable rainy day. Saul if you’re reading this I would love to hear your comments.
Regarding the three-factor Saul test, or what I’m calling the trifecta, I highlighted three columns used for a first pass screen.
Duma, thanks for the note. I did have help as others came in to add some of the details.
Your suggestion is very interesting and I agree it would be a useful way to track the health of a decision. I’m not sure if the first sheet is the best place to do that but I will noodle it over. It may require a separate sheet where the quarterly “highs” are tracked to show actual appreciation. That may be possible as I’m now typing this and thinking about how best to capture the information.
I’ll noodle on it further. Thanks for the comment.
Kevin, excellent work and thank you for posting your spreadsheet. It appears that when year ago ttm EPS is negative and current ttm EPS is positive, you default in .01 as a divisor for the growth percentage calculation, resulting in an extreme growth rate divisor in the 1yrPEG calculation. Have you considered any other ways of handling of this?
For my similar evaluations, I have been using EPS estimates, working forward from the first positive ttm EPS, in order to mitigate EPS growth inflation while minimizing usage of estimates. I don’t espouse this as better, and recognize it would be tough to implement in your spreadsheet. I wonder how others are handling this situation.
Saul, would you care to comment on how you handle this situation?
It appears that when year ago ttm EPS is negative and current ttm EPS is positive, you default in .01 as a divisor for the growth percentage calculation, resulting in an extreme growth rate divisor in the 1yrPEG calculation. Have you considered any other ways of handling of this? For my similar evaluations, I have been using EPS estimates, working forward from the first positive ttm EPS, in order to mitigate EPS growth inflation while minimizing usage of estimates. I don’t espouse this as better, and recognize it would be tough to implement in your spreadsheet. I wonder how others are handling this situation. Saul, would you care to comment on how you handle this situation?
I haven’t found any clear way to handle the question of negative past results which is applicable all the time. With XPO I simply didn’t calculate EPS, rate of growth, and 1YPEG. I see that with Solar Edge and Paycom I gave them a rate of growth rounded down to 200% (Paycom was at TTM earnings of 27 cents up from 4 cents (which gave a nominal rate of growth of 575%), and Solar Edge had 9 cents and 20 cents the last two quarters but was comparing with negative earnings the year before.) Other fast growing companies, where I am dealing with real numbers, like CRTO, SWIR, and SKX, I just give them the rate of growth they have even if it’s a big number. (Example SWIR 83 cents up from 26 cents I gave them the 219% gain).
I’m not claiming that this is ideal, or that it’s rational. It’s more a judgement thing because if you start from a tiny base of under five cents, you can get huge percentage gains that aren’t realistic.
Inspired by Kevin’s spreadsheet, I started my own using an almost identical format. Much of the information is identical, but I have added a bunch of others as well.
I was wrestling with what to do in the negative to positive swing case and opted for a penny in the denominator. Unfortunately it had a skewed effect of painting a stratospheric growth path.
I took a stab at ‘pegging’ the PE to 200% if any calculation resulted in something greater. The updates are now in the sheet.
The only negative effect this change has is it now puts CRTO at a 1YPEG of .31 instead of .06. Should this be the case after all?
Saul, could you share what you had for CRTO’s YoY EPS growth percent? I’m thinking maybe I should come up with a different heuristic.
I have been making more updates to the sheet, and I’ll describe some more recent changes:
I added a column to show what the stock price ‘could’ be if the EPS growth rate stays constant. That is, I show what the price will be when the 1YPEG gets to 1.
I added a column to show how many ‘baggers’ the stock could have, again with the theory that the growth rate continues.
I added a sheet to start to collect the YoY stock price highs in each quarter. I’m still wrestling with some google finance formulas to find out how to query for this information. As such, this sheet is not ready for prime time yet.
I added #1 and #2 as a means to show when you might start thinking about an exit plan for the stock. As quarters come and go new information will be added to the sheet and the 1YPEG will be updated as a result. The parity price and # baggers will change in due course as a result. What I expect will happen is that you’ll start to see the stock price and its parity price start to converge, that is the stock price will get higher and the parity price will get lower over time and eventually meet. This of course is if everything goes as planned, which we all know rarely ever happens!
Saul, could you share what you had for CRTO’s YoY EPS growth percent? I’m thinking maybe I should come up with a different heuristic.
Kevin, don’t model anything based on CRTO. It all depends on whether you figured it in euros or dollars, whether you went back and changed previous earnings based on current exchange rates, or whatever. A 1YPEG 0.31 or 0.18, or 0.06 (too low) all say the same thing. That the company is growing a lot faster than its PE, which is all the test is meant to tell you.
That said, I had a rate of growth of 220%, but it doesn’t really matter. The information that you get isn’t that fine tuned. For example, if I get 0.20 or 0.30 they both give me the same message.
Saul
For Knowledgebase for this board please go to Post #9286
Since these calculations are meant to be indicators more than anything else I left it pegged to 200% for the time being. It should be close enough.
On that front, I added a ‘trifecta’ indicator column that will turn into an X when the following criteria are met. Again, this is only an indicator of the stock measuring up to the first smoke test of desirable qualities. More due diligence is required.
Chris, the numbers came from the last 4 quarterly earnings reports.
In each quarter’s report they (usually) always present an EPS comparison to the same period a year ago.
If you go down to the table where they report their diluted EPS for the quarter, look immediately to the right and you will see last year’s quarterly result.