Hey folks, over the last week or so I’ve started rolling out to 1ypeg.com the first round of new experimental tools that I’ve been building for myself to help improve my accuracy. I thought I’d mention them just in case anyone else thinks they might find them useful.
I want to emphasize “experimental”: there are very likely bugs, so please always double-check everything and do your own due diligence.
Historical Adjusted P/E Valuation Bands
The first new tool is a chart that shows historical valuation bands, based on Adjusted TTM P/E, over the past few years (assuming enough earnings data has been entered for the company in question). The chart shows the percentage of market days that the stock has spent above various P/E’s over the full timeframe, along with a marker showing where the stock is trading at today. This can help provide some historical context for how the market has tended to value the stock over time compared to how it’s valuing it today.
Now obviously, this is more useful for some stocks than others, and the data should be viewed very critically. For example, the median P/E for Skechers (the halfway point, where the market has traded above it roughly 50% of market days) is 81 because its EPS was coming off such small values, resulting in very high P/E’s. I don’t think anyone would expect the stock to ever trade at that P/E again. But for Skyworks, its median P/E is around 17.7, which is more plausible.
Along the right side of the chart are two additional sets of values: what the share price would look like today at each of those P/E bands given the current TTM EPS, and how much upside (or downside) each of the bands would represent from today’s trading level.
Historical Adjusted P/E Chart
Below the P/E Valuation Bands chart is a basic line chart showing the historical changes in Adjusted P/E over time. This can help complement those P/E bands with some additional context. For example, the P/E of SWKS slowly grew from Jan 2014 to the this past summer and then promptly collapsed to where we’ve seen it recently, whereas SKX has tended to compress over time from its very high P/E’s as earnings grew.
Very Simple Forward Modeling
At the top of the EPS table (just below the log chart) there’s now a “Model Future EPS” button that allows you to model the answers to a few basic questions about what things could look like going forward:
What might things look like next quarter given a quarterly EPS estimate (from management’s guidance, for example)? This will show you what the basic stats will look like: the TTM EPS, YoY growth, 1YPEG, what the new adjusted P/E would be given today’s price, and what the new price would be if the market continued to award today’s P/E to the stock. In addition, a P/E Band chart (like the one mentioned above) will be shown, but this time the share prices shown on the right side will be based on the modeled TTM EPS instead of the current TTM EPS. That can let you see what share prices might look like at the various P/E bands for that modeled EPS. The upside/downside are based on today’s price, giving you a look into what kind of share appreciation (or depreciation) might be possible from today at those various bands.
What might things look like given a future target TTM EPS (like the future $8 EPS goal that SWKS management has laid out)? Because it’s at an arbitrary future point in time, no YoY comparisons or 1YPEGs will be shown, but you can still see what that might look like from a P/E and share price perspective based on today’s values, along with the P/E bands.
What might things look like given some amount of future growth in TTM EPS (e.g., when AMBA has grown TTM EPS by 50%)? Again, no YoY comparisons or 1YPEGs will be shown, but you can see what the growth would do to the P/E given the current share price, or the share price if the current P/E stayed the same, along with the P/E bands.