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Famous Dave's of America Inc. Message Board

  • jc_magical_mystery_tour jc_magical_mystery_tour Nov 8, 2010 2:41 PM Flag

    PE vs. Growth, DAVE analysis

    It's hard to find quality stocks where the growth rate exceeds the PE. This one is hard to figure with .86 in the last 12 months and I see it just traded at 8.96. So that's a PE of about 10.76 according to my broker's calculation. That's on last 12 months earnings and doesn't look ahead at all. I don't see growth suddenly slowing. This should be trading much higher than where it is now.

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    • I agree. BUMPS

    • WTF?

      What are you calling "growth"?

      And why would you think it's bigger than PE?

      PE is in the 10's.

      Growth is in the 10%'s; i.e., 0.1 or so.

      That's two orders of magnitude, there.

      And the relationship between growth rate and PE is entirely fuzzy in the first place. As if PE itself weren't a piece of voodoo. PE measures what the market thinks is your debt-discounted sale price now vs. the profits you've made over the past year. What it's supposed to mean is anyone's guess, and the fact that it omits debt makes it a hugely variable piece of misinformation. Growth rate (growth of profits? revenues? assets? market cap?) measures where you think you're going vs. where you are now. In the 80s Peter Lynch invented the PEG, which is even bigger voodoo than PE, because people had stopped feeding his company when he pressed their PE button.

      Dump the numerology. It won't tell you what you've been told it will tell you.

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