Andy:
The thread starts with a simple question…have you backtested the 1ypeg…pretty simple question really and since many (perhaps most) posters here seem interested in using it as a selection tool, it seems odd that You would view it argumentative to ask what validity it may have.
Why wouldn’t you want to know if the 1ypeg afforded you better returns or less risk?? Why wouldn’t you want to know if the tabulations and tracking of this indicator is of any value especially since it is a Saul inspired indicator that is not an “industry standard”.
And yes, back testing is a superior means to test a system particularly compared to blind faith and prospective chance. At the same time, a previous tested indicator may not guarantee future performance so nothing is fool proof.
Spend some time at the mechanical investment board. You can see efforts at trying to identify useful screens/tools to improve results.
I don’t use the 1ypeg…never have, but that doesn’t mean I don’t see the “argument” in favor of it over the PEG as Saul has explained…simply stated, it retrospectively states what actually is the valuation based on growth rate of trailing 12 month… I get the concept as compared to a guess about future growth. But since the PEG has not turned out to be useful, why should one expect the 1ypeg?
I don’t know the answer mind you, that was the question.
Since you use it, I am sure you will want to explore its usefulness. As you may know, there are quant programs such as these to drill down to specific indicators: