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Peter Lynch Fair Value
Posted by: office1 (IP Logged)
Date: January 30, 2014 03:39PM

I'm trying to figure out exactly how the Peter Lynch fair value is calculated because some stocks don't have that listed. From the description:

=(PEG) x (5 yr avg EBITIDA growth rate) x (EARNINGS PER SHARE)

=(PE/5 yr avg EBITIDA) x (5yr avg EBITIDA growth rate) x EPS

first question: how can I find the 5 yr avg EBITIDA?

second question: do you use the trailing 12 months EPS for the EARNINGS PER SHARE?


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Re: Peter Lynch Fair Value
Posted by: Vera (IP Logged)
Date: January 30, 2014 04:35PM

Q1: 5-Year Earnings Growth Rate can be found on the 10-year financials page. www.gurufocus.com/financials/WMT. It's just under 10-Y financials tab. If 5-Year Earnings Growth Rate is greater than 25% a year, we use 25.
Q2: Yes, we use the trailing 12 months EPS for the EARNINGS PER SHARE?


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Re: Peter Lynch Fair Value
Posted by: office1 (IP Logged)
Date: January 31, 2014 12:39PM

Under the 'GURU TRADES' tab there is a table of key ratios. In that table there is an 'EPS $'. Is that the 12 month trailing EPS you use?

Thanks for your help!


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Re: Peter Lynch Fair Value
Posted by: Vera (IP Logged)
Date: January 31, 2014 12:57PM

The EPS under the 'GURU TRADES' tab is the last fiscal year EPS.

We don't use this data to calculate Peter Lynch Fair Value.

We use 12 month trailing EPS. The 12 month trailing TTM data can be found on '10-Y FINANCIALS' tab. Under 'Per Share Data', there is one called Earnings per Share (Diluted). You will find the TTM data there.

Thanks!


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Re: Peter Lynch Fair Value
Posted by: office1 (IP Logged)
Date: January 31, 2014 01:25PM

Thanks, found that. Back to the original question. When trying to calculate the PEG which is the first variable in the Lynch formula. It says it's the PE/(5 yr avg EBITDA). I now how where to find the 5 yr avg EBITDA growth rate but I don't know where to find the 5 yr avg EBITDA. I found the TTM value under the per share data of the 10-yr financials. Is that the actual value you use?

Thanks again for all your help.


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Re: Peter Lynch Fair Value
Posted by: jdunfee2002 (IP Logged)
Date: April 24, 2014 10:37PM

[www.gurufocus.com]

Per office1, Peter Lynch Fair Value on GuruFocus is calculated as =(PEG) x (5 yr avg EBITDA growth rate) x (EARNINGS PER SHARE)

Those are a lot of calculations but Vera says that two of those numbers are listed on the 10-yr Financials page

5-yr EBITDA growth rate

See www.gurufocus.com/financials/MU, 5-yr EBITDA growth rate = 25.8

If 5-yr EBITDA growth rate > 25, use 25.

EARNINGS PER SHARE

Vera says to use TTM EPS (Diluted)

www.gurufocus.com/financials/MU, EPS (Diluted) = 2.41

5 yr avg EBITDA growth rate x EARNINGS PER SHARE = 25 x $2.41 = $60.25.

If we are to reach the Peter Lynch Fair Value listed of $39.81, PEG would have to be less than 1, but that is highly unlikely as it rarely occurs and it doesn't occur for MU from the following:

PEG from Vera

PEG = PE / avg 5-yr EBITDA

I calculated avg 5-yr EBITDA by averaging the 2009-2013 EBITDA per share data = (.64 + 3.83 + 2.76 + 1.58 + 3.14)/5 = 2.39

It's unclear which PE is used in the formula, but all PE numbers are more than 2.39, and all 5-yr average PE numbers are also > 2.39. Therefore, it seems that the formula written by Vera is not correct or did I take the numbers from the wrong places? I thought I followed exactly what she wrote...

Can anyone help?



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Re: Peter Lynch Fair Value
Posted by: Vera (IP Logged)
Date: April 25, 2014 10:07AM

The 5-Year EBITDA Growth Rate for MU used here is 16.52%. This is the 5-Year EBITDA (TTM) Growth Rate, which is different from the 5-Year EBITDA Growth Rate of 25.8%.

Micron Technology Inc's Earnings Per Share (NRI) for the trailing twelve months (TTM) ended in Feb. 2014 was 0.04 (May. 2013 ) + 1.46 (Aug. 2013 ) + 0.3 (Nov. 2013 ) + 0.61 (Feb. 2014 ) = $2.41.

Peter Lynch Fair Value = PEG * 5-Year EBITDA Growth Rate * Earnings Per Share (NRI) (TTM)
= 1 * 16.52 * 2.41
= 39.81


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Re: Peter Lynch Fair Value
Posted by: Vera (IP Logged)
Date: April 25, 2014 10:13AM

PEG is defined as the P/E (NRI) Ratio divided by the growth ratio. The ratio we use is the 5-year average EBITDA growth rate, which is 25.8%.

Micron Technology Inc's PEG for today is calculated as

PEG = P/E (NRI) Ratio / EBITDA Growth Rate (5-year average)
= 10.90 / 25.80
=

0.42

You can go to definition pages to see how we calculate the ratio.

[www.gurufocus.com]

[www.gurufocus.com]

[www.gurufocus.com]

Thanks,

Vera



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