저자: PeterLynch · 외국인
요약 보기
PER만으로는 주식의 고저평가를 판단할 수 없으며, PER을 이익성장률로 나눈 PEG 비율(1 미만 저평가, 1 근처 적정, 2 이상 고평가 등)로 평가해야 한다는 주장. 배당수익률을 성장률에 더하는 보정, 성장률 추정의 불확실성, 적자 기업 및 경기순환주에 대한 한계도 제시. PEG는 리서치의 출발점일 뿐이라는 강조.
다듬은 글
I'm going to give you a formula that fits on a napkin, takes about 10 seconds to calculate, and would have saved half the people I've ever met in this business from paying way too much for a stock they were excited about. It's not complicated. It's not proprietary. I put it in a book almost 40 years ago, and people still write to me like I've handed them a secret code.
It's not a secret. It's just something almost nobody actually bothers to calculate before they buy. Because the number that's supposed to matter, the PE ratio, only tells you half the story, and most people stop reading right there. Here's the problem with a PE ratio on its own. Somebody tells you a stock is trading at 40 times earnings, and your gut says that's expensive.
Somebody else tells you a different stock is trading at eight times earnings, and your gut says that's cheap. And your gut, in both cases, might be completely wrong. Because a PE ratio by itself doesn't know anything about growth. A company trading at 40 times earnings that's compounding its profits at 40% a year might be one of the great bargains sitting on the market right now.
And a company trading at eight times earnings that's barely growing at all or shrinking might be the worst trap you could possibly wander into. The number looks cheap. The business is dying. Those are two very different things, and the PE ratio alone can't tell them apart. So, here's what I did. I took the PE ratio and divided it by the company's growth rate.
That's it. That's the whole formula. Price to earnings divided by growth. PEG. If a stock trades at a PE of 15 and it's growing earnings at 15% a year, you divide 15 by 15 and you get one. In my book, I wrote it plainly. The PE ratio of any company that's fairly priced will equal its growth rate. A PEG of one means the market has priced the stock roughly correctly relative to how fast it's actually growing.
Below one and you're paying less than the growth deserves, which is exactly the kind of stock I spent my whole career hunting for. Above one and you're starting to pay a premium, and the further above one you go, the less room there is for anything to go wrong before you're sitting on a loss. I didn't invent the PE ratio and I didn't invent the idea that growth matters.
Both of those had been sitting around finance for decades before I ever got near Fidelity. What I did was refuse to look at either one alone because by the time I was running Magellan, I'd already watched too many smart people get fooled in both directions. I watched investors avoid a company because the PE looked high, 40, 50 times earnings, without ever asking.
Let me walk you through it with real numbers because a formula on a napkin only means something once you've actually used it. Say a company is selling for $30 a share, earning $2 a share, and expected to grow at 15% a year. Divide the price by the earnings and you get a PE of 15. Divide that 15 by the growth rate of 15 and you land right on a PEG of one.
Fairly priced. Not a screaming bargain, not a trap, just an honest price for honest growth. Now take a different company. Same PE of 15, but this one's only growing earnings at 5% a year. Divide 15 by five and you get a PEG of three. That's not a bargain anymore. That's a company where the price has completely detached from what the business is actually delivering and you're the one left holding the difference if the market ever corrects it.
Now flip it around because this is where the fun starts. And this is genuinely where I made a lot of money for the people who trusted me with theirs. Imagine a small, fast-growing company trading at a PE of only 10, but growing earnings at 25% a year. Divide 10 by 25, and your PEG comes out to 0.4. That's the kind of number that used to make me sit up straight in my chair.
A company compounding at 25% a year that the market is pricing like it's barely growing at all. That gap between what the business is actually doing and what the price is telling you, that gap is where the 10 baggers live. I wasn't chasing companies with low PE ratios for the sake of a low number, and I wasn't chasing companies with fast growth regardless of price, either.
I was chasing the mismatch between the two, because that mismatch, more often than almost anything else I looked at, is where the real money was hiding. I want to give you my own rule of thumb here, because I wrote this down plainly in my book, and it still holds up. A PE ratio that's half the company's growth rate is very positive.
A PE ratio that's twice the growth rate is very negative. We used that measure constantly when I was running money at Fidelity, sorting through hundreds of companies a year, because it gave me a fast, honest first pass before I ever went further into the real research. Less than one on the PEG scale, poor value, meaning it's actually a good sign, not a bad one.
I know that sounds backwards, but stay with me. Around [snorts] 1.5, that's a company that's fairly priced. Nothing wrong with buying it. Nothing especially exciting, either. But what you're really hunting for is a PEG of two or better, and by better, I mean lower, because a low [clears throat] PEG in this context is the good direction.
I once found a company growing at 15% a year, paying a 3% dividend, trading at a PE of only six. Run that math and you get a fabulous number, well above two on my scale. That's not a stock. That's a gift somebody left sitting on the table because they were too busy staring at the low PE ratio and never bothered to ask what the growth rate actually was.
Now, I owe you an honest caveat here because I never wanted this formula treated like gospel and people who use it that way get themselves in trouble. Growth rates are estimates. Nobody, including me, can predict a company's earnings growth with certainty five years out. And if your growth number is wrong, your PEG ratio is wrong right along with it.
No matter how precise the math looks on the page. A tiny company that's supposed to grow at 50% a year, but actually grows at 20% a year, is going to look like a screaming bargain on paper right up until the moment it doesn't. And that gap between the estimate and the reality is exactly where a lot of investors get burned chasing a number instead of a business.
This formula was never meant to replace the homework. It was meant to speed it up. Find the mismatch with the PEG ratio, then go verify it's real by actually reading the filings, checking There's another wrinkle I ran into constantly and it's the reason I eventually started using a second version of this formula for a specific kind of company.
The plain PEG ratio has a blind spot. It completely ignores dividends. And that's a real problem when you're looking at a large, mature company that isn't growing earnings quickly anymore, but is sending a healthy chunk of cash back to shareholders every single quarter. Take a utility company earning $3 a share, trading at $48.
So, a P/E of 16, growing earnings at only 4% a year. Run the plain PEG on that, and you get 16 / 4, a PEG of 4, which looks dreadful. Overpriced, avoid it, nothing to see here. But, that same company is also paying out a dividend yield of around 4 and 1/2%. Add that yield to the growth rate before you divide.
16 / 4 + 4 and 1/2, and suddenly your number drops to under two. A far more honest picture of what an investor in that stock is actually getting paid to wait. I started adding the dividend yield into the growth side of the equation for exactly this reason, and it kept me from writing off perfectly reasonable, steady companies just because their earnings growth alone looked unglamorous next to a fast grower.
There's one more trap I want to warn you about, because I've seen it wreck more portfolios than almost anything else tied to this formula, and it's the trap of comparing PEG ratios across completely different kinds of companies like they're speaking the same language. A PEG ratio only means something when you're comparing it against a reasonable baseline for that specific kind of business.
A young technology company growing earnings at 40% a year and trading at a PEG of 0.8 is playing an entirely different game than a 100-year-old industrial company growing at 6% a year with the exact same 0.8 PEG. The math looks identical. The risk sitting underneath that math is nowhere close to identical.
The technology company's growth rate might not survive the next two years if competition shows up. The industrial company's 6% growth might be about as reliable as anything you'll find in the market. Never let a clean number talk you out of asking the messier question underneath it, which is simply how likely is this growth rate to actually hold up?
And I want to flag the one place this formula breaks down completely because I don't want you plugging numbers into a broken calculator and trusting the output. If a company isn't profitable yet, if it's actually losing money, the PE ratio doesn't exist in any meaningful sense, and neither does the PEG ratio built on top of it.
I know there's an entire generation of investors now who love young, unprofitable companies with exciting growth stories, and I'm not telling you those companies can never be good investments. I'm telling you this particular formula has nothing useful to say about them because you can't divide by a number that isn't really there yet.
For a business like that, you need a completely different set of tools, and anyone who tries to hand you a PEG ratio on a company with no earnings is either confused or hoping you won't check their math. I'd also tell you to be suspicious of your own optimism when you're the one filling in the growth rate because this is where I've watched otherwise careful people quietly cheat their own formula without realizing it.
It's tempting to reach for the rosie's analyst estimate, the one that makes your PEG ratio look the most attractive instead of a more conservative, realistic number. I always preferred running the math with a growth rate I'd actually be comfortable defending out loud, not the most optimistic number on the page because a PEG ratio built on a fantasy growth rate isn't giving you a bargain.
It's giving you a more convincing way to fool yourself. So, let's put this all together because a formula only matters if you actually know when to reach for it. When you're looking at one of my fast growers, a smaller, aggressive company expanding earnings at 20% a year or more, the plain PEG ratio is your fastest filter for separating a genuine bargain from an expensive story everyone's already excited about.
When you're looking at a stalwart or a slow grower, a large, mature business where the growth has leveled off, but the dividend is doing real work, add that dividend yield into the formula before you judge the price, or you'll talk yourself out of perfectly good, steady investments for the wrong reason.
And when you're looking at a cyclical, be honest with yourself that a single year's growth rate can be almost meaningless, because a cyclical company's earnings can swing wildly depending on where you are in the economic cycle. And plugging a boom year's growth rate into this formula will make an expensive stock look artificially cheap right before the cycle turns against you.
I want to leave you with the same warning I'd give anyone standing in front of a spreadsheet with this formula open. A low PEG ratio is an invitation to look closer, not a reason to buy. It tells you where to spend your time, not what to do with your money. I've watched people run this exact calculation, see a beautiful number under one, and buy the stock that same afternoon without ever checking whether the growth estimate was realistic, whether [snorts] the balance sheet could survive a bad quarter, or whether the company even had room left to keep growing at that pace.
That's not investing. That's doing arithmetic and calling it research. The formula earns you a seat at the table. It doesn't do the rest of the work for you. So, here's what I want you to actually do with this. Next time you're looking at a stock, don't just glance at the PE ratio and trust your gut about whether it's expensive or cheap.
Find the earnings growth rate, divide the PE by it, and see where the number falls. Under one, you've found something worth investigating properly. [snorts] Around one, fairly priced. Nothing wrong with it, nothing urgent, either. Well above one, ask yourself honestly whether the story justifies the premium, because more often than not, it doesn't.
And if you're looking at a mature company with a real dividend, don't forget to add that yield in before you judge it too harshly. That's the whole formula. 10 seconds of math that can save you from paying growth stock prices for a company that stopped growing years ago. Or even better, help you find the next one that's growing fast while the rest of the market is still asleep at the wheel.
But I want to be honest with you about what this formula is and isn't one last time before we're done, because I've spent this entire video handing you a shortcut, and shortcuts are dangerous in the hands of someone who mistakes them for the whole journey. The PEG ratio never told me what to buy. It told me where to start looking.
Every single stock I ever bought using this formula as my first filter still had to survive everything else I've talked about elsewhere. Understanding the actual business, checking the balance sheet, knowing which of my six categories it belonged in, and being honest about whether I could explain in 2 minutes why the growth was real and likely to continue.
A cheap PEG ratio on a business I didn't understand was never a stock I wanted. It was just a number I hadn't finished investigating yet. So, if you walk away from this with one thing, let it be this. Stop looking at a PE ratio by itself and trusting your gut about whether a stock is expensive. Divide it by the growth rate, add the dividend yield in when a company's paying one, and let that number tell you where to spend your research time, not what conclusion to jump to.
And once you found a mismatch worth investigating, go do the rest of the work because the formula only ever got me to the door. Everything that actually made me money happened after I walked through it.
Comments 0