learning important concepts in financial_research

May 28th, 2015
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Abilene Christian University
Course: financial_research
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Research the Standard & Poor’s Stock Market Index (S&P 500) for the past five years. Chart the price movement in the company’s common stock against the S&P price movement. State and support your opinion on the company’s common stock as an investment opportunity. References: Use at least five references and follow APA format when preparing the report.

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The PEG RatioThe PEG Ratio is the PE Ratio of the stock divided by the growth in future EPS of the stock. When used in conjunction with the PE and the P/BV ratios, it gives a clearer picture of the under or over valuation of the stock. Typically a stock with a PEG of 1 means that it is fairly valued in the eyes of the market provided the market is trading at a PEG of less than 1 and so are the peer group stocks. It is important here to note that the PEG ratio cannot and should not be used in isolation. Lets take the example of the transmission and distribution sector. Given the government's thrust on the power sector most of the stocks in this sector have a PEG of less than 1. While the market growth rate warrants that in the large cap universe as well as the mid cap universe the market is overvalued and fairly valued respectively, what this means is that the sector which comprises of companies like Kalpataru Power Transmission, Jyoti Structures and KEC International will be a relative outperformer in the times to come. What this also implies is that these companies with high growth potential and PEGs of less than 1 are currently undervalued. Similarly a PEG ratio of greater than 1 means that the company (assuming that the sector that the company belongs to has a PEG of less than 1) is overvalued. Here we can take the example of Larsen and Toubro. The company's valuations including the PEG are way beyond the EPS growth that it can deliver. But hold it. This does not mea

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