I am really pleased with the spreadsheet that Kevinh68 provided. It is awesome. So awesome, I added my own touch.
I love the low 1YPEG approach, and there is nothing sweeter than finding a fast-growing, solid company that has a PEG under 1. Well, maybe one thing sweeter: A fast-growing, solid company with a 1YPEG under 1, and the last few quarters showing accelerating earnings (thus, increasingly lower PEG rates for 9-months, 6-months, and 3-months earnings growth).
I added columns for those factors on a copy of the existing spreadsheet. Accelerating earnings is usually a key indicator that will attract investor interest, leading to higher demand (and price) for those shares. Just another nugget to consider when looking for candidates to invest in!
I calculate this as well on my own, though I think I do it differently. I look for acceleration in YoY TTM earnings growth, which means I need 12 quarters of data: the first 8 quarters give me a single set of YoY TTM growth figures for each quarter, and then next 4 give me a second set so that I can compare and compute acceleration. I tend not to pay as much attention to sequential acceleration since it can be influenced by seasonality (though it’s certainly a positive if it’s there).
I also don’t look for decreasing 1YPEG, as that will be dependent on the stock price (in addition to earnings, of course) and I don’t really care about what the price has been in the past.
But that’s just how I’m doing it! I’d be curious to know what others are doing.
also don’t look for decreasing 1YPEG . . . . But that’s just how I’m doing it! I’d be curious to know what others are doing.
I also do not look for decreasing 1YPEG. I am in 100% agreement with you there.
I mostly look just at JPEG. I find it much easier to understand, and the colors tend to be very nice
After looking at the latest up-to-date JPEG files that I have obtained from various sources, I just buy the stocks Saul has. This seems to work better than interposing my own judgment and leaves a lot of time to look at JPEGs.
I understand that this is contrary to the spirit of the board, and that (and I hate to say this) Saul will not be here with us forever, but my time frame is pretty short – I am basically on a year-to-year lease with the Fates (however you define them) – so I am willing to just buy fish at the fish market, so to speak. Learning to fish is just one thing I probably will never really do. (I am speaking metaphorically here – actually, I am a pretty experienced angler.)
In the unlikely event that my thread spins a bit longer than Saul’s, I will just buy the stocks that Andy and Anirban buy.
Again, I know this is the height of irresponsibility, but (i) I take full responsibility for my choices and (ii) my risk is mitigated by my policy of keeping my investments at least 80% in cash and cash equivalents (sort of in keeping with the “no green bananas” theory . . .).
And there are so many things I want to understand and do – it is nice to devote as much time as possible to that stuff (which for me includes physics, time in the outdoors, time with kids . . . not so much time with spreadsheets, though.)
Tiptree, I was just looking at the table, and the second entry, ABMD jumped out at me. Quarterly earnings of $2.24 or something, up from 30 cents sequentially and 9 cents the year before. Gave rates of growth in the 10’s of thousands of percent. You don’t have to be a genius to realize that something must be wrong with a figure like that! Sure enough, the press release spells it out clearly. Someone collected GAAP earnings which are often silly like that, instead of REAL earnings (adjusted).
They reported $96 million of GAAP earnings for the quarter
Of which $84 million were a release of valuation tax adjustment (meaning they are writing off all their past tax losses in one shot).
Their real operating earnings were $12+ million,
Which when divided by the number of shares gave the real earnings per share of 28 cents. Still very good, but not ridiculous.
Sorry guys! You just CAN’T use earnings you get off Yahoo’s computer or equivalent, and expect it to give actionable information. And you CAN"T use GAAP information and expect it to give actionable information.
Just saying…
Saul
For Knowledgebase for this board please go to Post #9939
A fast-growing, solid company with a 1YPEG under 1, and the last few quarters showing accelerating earnings (thus, increasingly lower PEG rates for 9-months, 6-months, and 3-months earnings growth). - Tiptree
I also don’t look for decreasing 1YPEG, as that will be dependent on the stock price (in addition to earnings, of course) and I don’t really care about what the price has been in the past. - Neil
Hi Neil, As I look at what Tiptree is saying he’s using today’s stock price for all his calculations, and is just calculating the PEG rates based on “9-months, 6-months, and 3-months earnings growth” as a shorthand for accelerating earnings growth.
On the other hand, you are looking at this years TTM earnings growth vs the TTM earnings growth a year ago, so comparing PEG rates (depending on prices now and a year ago) wouldn’t be relevant, as you say. The two of you are looking at different things.
Saul
For Knowledgebase for this board please go to Post #9939.
It’s also the top of the Announcements column on the right side of every page on this board
Hi Neil, As I look at what Tiptree is saying he’s using today’s stock price for all his calculations, and is just calculating the PEG rates based on “9-months, 6-months, and 3-months earnings growth” as a shorthand for accelerating earnings growth.
Yes. I use today’s PE ratio for all calculations. The 1YPEG that we all know and love is the current PE divided by the TTM earning growth (YoY). I just added the ‘trailing 9 month’ earnings growth rate (as compared to the similar 9 months from the year before), then the ‘trailing 6 months’ earnings earnings growth, then finally just the most recent quarter’s earnings growth. Then, using those growth rates, I calculated the 9MPEG (nine-month PE/G ratio), the 6MPEG, and the 3MPEG.
In theory, if those numbers are gradually getting smaller from 1YPEG down to 3MPEG, the indicates that earnings growth is accelerating. You could glean the same information just looking at the 3 new growth rate columns… but the trend should be higher instead of lower.
Nicely done. I took your column additions and incorporated them back into the original spreadsheet. Please feel free to take a peek at what I did to make sure I didn’t miss anything.
I did slightly re-organize the columns to show earnings going from YoY down to 3mo on 3mo and then did the same for the “rear-view window” PEG. Last, I added a computed column to show if a stock is showing acceleration in its PEG (e.g. if 3mo PEG < 6mo PEG < 9mo PEG < 12mo PEG).
I also tried to add a graph to show how steep the acceleration was trending but there wasn’t enough room to fit the graphs into each row. However, I think the color bands in the PEG columns can give a little hint of this trend. If the coloration is going from deep red, to light red, to yellow, to light green to deep green (in that order), the stock may be showing significant early trends into a new growth cycle (and worth keeping an eye on).
BUT, I would keep this spreadsheet separate from your original. It adds a lot of clutter, distracting from prominence of the 1YPEG. The 9, 6, and 3 month data is supplementary only.
Just a suggestion. For those who find accelerating earnings growth important, then this new spreadsheet will have value. For those who wish to stick to Saul’s original thesis, which we KNOW works, then I would provide the spreadsheet without those additional columns.
Of course, even 1YPEG is just a number. An interesting number, perhaps, but not a be-all-and-end-all number. One wants more than that number or even that number and a bunch of other numbers before making a decision.
I was just thinking the same thought. I think I have a simple solution. I’m going to add the new columns to a separate tab and call it earnings acceleration. I’ll leave the one indicator on the main tab to show acceleration exists. Then, if you want to know by how much you could jump to the second tab.
I like the idea of accessing one spreadsheet that has different tabs. That way - each user can create their own experience. If they want the basics - go for Tab 1, if a user wants more information - click on Tab 2, etc. Thanks for putting this together!
I was exploring the upgrades yesterday and agree completely. It is really powerful to be able to see where things are going for the last few quarters as well as the last twelve months.
I was just wondering what everyone would think about including a market capitalization column for the different companies?
I was thinking back to some of the things Saul has communicated and it seems like once a company grows much larger, it will be very hard to continue the growth. I’m thinking of GILD as I write this. It is one of my holdings and has been doing well. I’m just thinking now that the sales are $27.5B how long they can sustain this great growth rates. This could be a reason to get out as some point.
