PEG Ratios in Context – Part I in a Series on Valuation

Valuation metrics must often be placed into context. A case in point is our Focus Growth strategy’s forward P/E multiple, which at times raises questions due to its 20-30% premium to the benchmark. Typically, this P/E premium is examined relative to the expected earnings growth of our underlying holdings (the so-called PEG Ratio) but in our opinion this level of analysis does not go far enough. More instructive is comparing our P/E premium to the actual level of earnings growth that has been produced over time.

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