While you are right that 1YPEG is about the past and investing is about the future, the problem with metrics based on the future is that they are based on guesses. And, what are the guesses based on? Well, the past and someone’s idea of what is likely to happen next. I.e., a guess.
The advantage of 1YPEG is that it is based on actual numbers, not guesses. To be sure, it is history, but that means it is data, not speculation. And, its intent is not to be a final decision metric, but rather a screening tool. The idea is to identify companies who are growing very rapidly, but who don’t have an equivalently inflated PE, i.e., the market may not have priced in the growth to the extent they sometimes do.
And, yes, one does have to provide some further screening on other issues. The classic I keep citing is GILD with a big bump in earnings due to the introduction of Solvaldi. It is extremely unlikely that they are going to have a similar bump in earnings next year, unless they come up with another blockbuster, but it may still be that the market has not fully priced in the future earnings, so worth a look.
Likewise, a very small company that makes a transition from very small earnings to not quite so small earnings may look like fabulous growth until one looks at the actual size of the numbers.
So, yes, one can see these numbers and have surprises. Sometimes the surprises are justified, when the story changes or, at least, appears to. And sometimes, like lately, the surprises appear to be silly, temporary reactions, as if the stock was some high flyer built on air and speculation, when actually it is all substance.
The game is in telling the difference.