Hi Duma, If you’d like to backtest the 1YPEG, more power to you. But there’s nothing magic about it. It’s just common sense.
You look at the PE based on the last four quarters of earnings, and compare that to the rate that those earnings grew over the previous year. This gives you a simple idea of how expensive the stock is compared to its rate of growth. That’s all it is. Plain and simple.
And the idea is that there is a reasonable chance that what happened the last four quarters might have some follow through to the immediate future two or three quarters at least. Better than a total guess about what the rate of growth for the next five years will be anyway.