1. 164 - PEG What, Where, Why and How
Mike Torbenson
Puget Sound Chapter

2. Disclaimer
The information in this presentation is for educational purposes only and is not intended to be a recommendation to purchase or sell any of the stocks, mutual funds, or other securities that may be referenced. The securities of companies referenced or featured in the seminar materials are for illustrative purposes only and are not to be considered endorsed or recommended for purchase or sale by BetterInvesting™ National Association of Investors Corporation (“BI”) or the Puget Sound Chapter. The views expressed are those of the instructors, commentators, guests and participants, as the case may be, and do not necessarily represent those of BetterInvesting™. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

3. Disclaimer
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4. Class Description
P/E to Growth (PEG) is the bridge between growth and valuation. We review the underlying principles of PEG and how you can use this future and historical PEG to help pick a realistic growth.

5. Objectives When finished you will be able to Define PEG
Explain why you’d use PEG
Calculated historical and future PEG
Find PEG on the SSG and PERT
Use PEG to balance estimated growth and P/E
Use PEG to evaluate valuation risk
American Style Options began April 26, 1973 with only CALL options on 16 stocks. By 1975 traded on 32 stocks.

6. Why PEG? How much fuel is in your 2-stage rocket?
The growth rate defines P/E supported by earnings. For example a 10% annual growth will support a P/E of 10 resulting in a PEG of 10/10 = 1 1 or 100%.

7. What is PEG? PEG = PE / Growth Rate
Historical PEG uses past results such as the historical 5-year P/E average P/E (SSG Section 3) and 5yr or 10yr EPS Growth Rate (SSG Section 1)
Future PEG uses estimates such as 5yr Average P/E (SSG Section 4) and 5-yr Estimated EPS Growth Rate (SSG Section 1)

8. Where is PEG?
Toolkit 6
SSG Section 3
PERT
Online Tools

9. Historical Adjustment
Long term historical S&P 500 price appreciation is about 10% (including dividends)
Long term historical S&P 500 P/E is about 15.
The historical PEG for the S&P 500 is 15/10 = 1.5 or 150%.

10. How can I use PEG? Balance estimated GROWTH with P/E
Appreciation from EARNINGS?
Appreciation from P/E EXPANSION?
<Demonstrate Usage>

11. Summary Why PEG? What is PEG? Where is PEG? Historical Adjustment
Rocket fuel to riches!
What is PEG?
Growth = P/E
Historical
Future
Where is PEG?
SSG & PERT
Historical Adjustment
S&P 500 Historical Average PEG = 1.5 (including dividends)
Usage
Balance growth and P/E estimates
Verify price appreciation potential – both stages

12. Thanks
Mike Torbenson