This 1YPEG has already made me a bunch of money. In looking at my 1YPEG’s, and seeing SKX with a 1YPEG of 0.15(!!), I went out and bought a significant amount more early in the week, even though it was already my 3rd biggest position and already overweight. I bought it at $73.70 and it closed at about $89.65, so I made 21.6% on the money in a couple of days.
Thank you 1YPEG!
Saul
PS: If anyone is interested, CRTO was very low too, with a 1YPEG of 0.14. This means its rate of growth of earnings was seven times it’s PE ratio. They haven’t reported yet.
I did almost the same thing, bringing SKX up from 10th largest in my portfolio to 3rd. I also had purchased a bunch for my child in the 72 range. Can’t complain!
Thanks,
Ethan
Saul,
1YPEG looks like a very helpful metric. Does “earnings growth” refer to net income, revenue, or something else?
Thanks. Much appreciated
Andy
1YPEG looks like a very helpful metric. Does “earnings growth” refer to net income, revenue, or something else?
Hi Andy, It’s trailing twelve months EPS compared to what they were a year ago. So, for example, if a stock has not yet reported first quarter results, it’s 2014 earnings divided by 2013 earnings. But if they have reported March results it’s June 2014 to Mar 2015 results divided by June 2013 to Mar 2014 results, always the last four quarters divided by the four quarters before that.
Saul
I did almost the same thing, bringing SKX up from 10th largest in my portfolio to 3rd. I also had purchased a bunch for my child in the 72 range. Can’t complain!
Congratulations Ethan, nice purchase. Remember that it will bounce a bit and don’t expect it to continue straight up all the time.
Saul
Thank you!
Saul
Wondering if I did this right. For EPAM. Nasdaq says EPS growth rate is 250% (2.72 v 1.08); PE is 47, so 1YPE is .18
Did I come close?
Andy
I meant 1YPEG
Saul,
Just after you posted your thinking about thet 1YPEG stat I asked how you actually implement it in your decision making process.
I get it. Don’t bother answering the earlier post.
Once again, I am astounded and encouraged at how you focus on keeping things simple.
Some of the posters on this board, and throughout the investing community easily overwhelm the average person with all kinds of mysterious numerical exercises and extraordinarily sophisticated analytical techniques. You have a way of cutting through the noise and focusing on the very few things that actually matter. Chief among those things is earnings growth.
One could engage in a long philosophical discussion as to why earnings growth should be the hallmark of a good investment (and by implication, a good business). Kikoman (the soy sauce company) has been in business since before America was discovered (by the Europeans - the Chinese may have already been in gone). They’re private, so we don’t know the earnings history, but I’d venture for a few centuries, probably not much. But nevermind. Wall street myopically focuses quarterly earnings growth, and ultimately they call the shots. The rest of us are just along for the ride.
Thanks for providing a few keys to making it profitable.
I agree Saul CRTO is going to be an amazing investment. Thanks to Anirban for bringing it to us and Thanks to you for having this board. Its a great resource.
Andy
Wondering if I did this right. For EPAM. Nasdaq says EPS growth rate is 250% (2.72 v 1.08); PE is 47, so 1YPE is .18 Did I come close?
Andy, Please, Please, PLEASE, don’t use machine generated numbers from Nasdaq, Yahoo, or any other source. If you are thinking of putting your own money in a stock, think of it as “This is my money I’m investing!” Take the time to look at the company’s last four earnings press releases on the website. It will take you no more than 5-6 minutes for all four. Get each quarter’s adjusted earnings, and the one from the year before quarter, four times, and you are all set. But right now, since the last report was year end, ALL you have to do is look at the year end press release. That easy. I googled EPAM Investor Relations and here’s the information you want. It took me 45 seconds to get it.
Full Year 2014 Highlights
· Revenues increased 31.5% to a record $730.0 million, up from $555.1 million in 2013;
· In constant currency, revenue was up 34.2% year over year;
· GAAP income from operations for 2014 was $86.2 million, an increase of 12.7% over 2013;
· Non-GAAP income from operations was $123.1 million, an increase of 34.1% compared to $91.8 million in 2013;
· Diluted EPS on a GAAP basis was $1.40, compared to $1.28 in the previous year;
· Non-GAAP diluted EPS was $2.22, compared to $1.66 in 2013.
That’s all there is to it. It’s no harder to find than that! Neither of us has any idea where the Nasdaq computer got its faulty numbers.
Now let’s do the calculations:
*Earnings growth: 2.22 divided by 1.66 = 1.337, so earnings were up 33.7%.
*PE is $66.60/2.22 = 30.0
*PE divided by their rate of growth is 30/33.7 which gives you a 1YPEG of 0.89
Simple!
Saul
Saul
Thanks so much. I needed to see the process step by step so that I can do it myself
Very best,
Andy
Saul,
Sorry to be dense but how do you go from 1.337 to 33.7%. Simple math, But I cannot figure it out
Thanks.
Andy
If the two were the same, the ratio would be 1, so the increase is .337, i.e., up 33.7%.
(1.337 - 1) * 100 = 33.7%
Denny Schlesinger
Sorry to be dense but how do you go from 1.337 to 33.7%. Simple math, But I cannot figure it out
Sorry, I’m good at math and it comes naturally to me so I sometimes take it for granted and don’t explain.
Say you make $50 one year and $50 the next. You want to know how much the second year increased from the first. You divide year two by year one and you get 1.0 (They are both 50). And that 1.0 means one is 100%
of the other.
Now say it was 50 the first year and 60 the second. Now 60 divided by 50 gives you 1.2, so it’s 120% of the other, so it’s 20% more. (120% of something MEANS 1.2 of it)
We got 1.337 so this year was 133.7% of last year, so up 33.7
Perhaps a less confusing way to look at it is to subtract the difference. 60 less 50 is 10, so 10 is the amount of growth. 10 divided by 50 is .2, so 10 is .2 of 50, so it’s 20% of 50.
You are trying to do 1.66 and 2.22. The difference is 0.56. That’s the amount of growth.
56/166 is .337 or 33.7%
It just takes an extra step, the subtraction
Hope this helps, and thanks to others who tried to explain it.
Saul
Thanks Denny, tamhas, and Saul
Much appreciated
Andy
(*Earnings growth: 2.22 divided by 1.66 = 1.337, so earnings were up 33.7%.
*PE is $66.60/2.22 = 30.0)
Hello Saul I’m pretty horrible at math but was just trying to understand the input withouts being used. On the ePam example you showed that last year adjusted eps was 1.66 and the current quarter was 2.22.
When you made the calculation you divided 66.60/2.22 rather than 1.66/2.22 what did I miss? Just trying to understand these math tricks.
Gerald
last year adjusted eps was 1.66 and the current quarter was 2.22.
It is always four quarters vs four quarters. If it is 1st quarter just passed, then it is 2, 3, 4 from last year and 1 from this year compared to the same one year earlier.
When you made the calculation you divided 66.60/2.22
The second step is price divided by earnings (current price and earnings for the most recent 4 quarters)