Definition
Peter Lynch Fair Value is calculated as follows:
Peter Lynch Fair Value =
PEG *
5-Year EBITDA Growth Rate *
Earnings per Share
If 5-Year Earnings Growth Rate is greater than 20% a year, we use 20.
Please note that we use the 5-year average growth rate of EBITDA per share as the growth rate. EBITDA growth is subject to less manipulations than net earnings per share. In the calculation, PEG=1 because Peter Lynch thinks that the fair P/E ratio of the growth stock is equal to its earnings growth rate.
Explanation
Peter Lynch Fair Value applies to growing companies. The ideal range for the growth rate is between 10 - 20% a year.
Peter Lynch thinks that the fair P/E value for a growth company equals its growth rate, that is PEG = 1. The earnings here is trailing twelve month (TTM) earnings. The growth rate we use is the average growth rate for earnings per share over the past 5 years.
Related Terms
Earnings per Share,
PEG,
5-Year Earnings Growth Rate,
Median P/S Value,
Intrinsic Value (DCF Projected),
Intrinsic Value (DCF),
Intrinsic Value (DE),
Graham Number* All numbers are in millions except for per share dataDeVry, Inc. Annual Data
| Jun04 | Jun05 | Jun06 | Jun07 | Jun08 | Jun09 | Jun10 | Jun11 | Jun12 | Dec12 |
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DeVry, Inc. Quarterly Data
| Sep10 | Dec10 | Mar11 | Jun11 | Sep11 | Dec11 | Mar12 | Jun12 | Sep12 | Dec12 |
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