Tag Archives: PEG ratio

Micron Technology Inc +158,1% (1 YR)

Micron Technology Inc (MU) is a global manufacturer and marketer of semiconductor devices, principally NAND Flash, DRAM and NOR Flash memory. Micron is the largest U.S memory company and the company provides memory solutions for computing, communications, consumer and industrial applications, and serves both wireless and embedded applications.

micron logo

I feel a big enthusiasm toward chip makers that offer DRAM (dynamic random-access memory) products. Other producers are Samsung (OTC:SSNLF) and SK Hynix (OTC:HXSCF). Micron shows merit as an investment and will probably buy back its stocks in the future.

Maintaining its relationship with Apple (AAPL) will help the stock. DSG (DRAM Solutions Group) sales are up 198%, in part due to the acquisition of Japan`s Elpida Memory. One of the compelling things about Micron is its $615 million takeunder of Elpida Memory.

Elpida is a producer of DRAM for mobile devices. Net sales for the Q1 of 2014 increased 120% Y/Y. The devalued yen also helps pricing and cost of the overall transaction. DRAM is responsible for 69% of net sales and that is up 39% in 2013.

Micron was founded in 1978 and is headquartered in Boise, Idaho. The stock is up +26,5% so far in 2014. Up +158,1% (1 YR). So, what now? Is Micron still a buy? Micron has an extremely low PEG ratio of 0,86.

This is one of the best performers of all S&P 500 companies last 12 months. The stock is up +158,1% (1 YR), while S&P 500 is up only 17%. Micron stock still have room to rise up and seems to have strong earnings growth prospects.

One thing to consider is the high amount of insider activity. Some big stakeholders have diluted their stake in Micron, and heavy insider selling is a point of worry, but despite the selling activity, the stock is not volatile. It seems like the investors don`t care about that.

Reports today:

08:30 a.m EST Core Retail Sales m/m
08:30 a.m EST Retail Sales m/m
08:30 a.m EST Import Prices m/m
10:00 a.m EST Business Inventories m/m

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Price-to-earnings growth (PEG)

PEG ratio is used to determine the value of the stock while you look at the company’s earnings growth. This gives you a better picture and overview than P/E ratio. Take a look at LinkedIn. Price-to-earnings is just below 1000 now.

A high P/E like that may look like a good buy, but factoring in the company`s growth rate to get the stock`s PEG may tell you another story. A company with a lower PEG ratio may be undervalued given its earnings performance.

The PEG ratio tells you whether the stock is over or underpriced and that varies by industry and what kind of business it is. The accuracy of the numbers in the PEG depends on all the inputs used. If you use historical growth rates, you may provide an inaccurate PEG ratio because the future growth can deviate from historical growth rates. Some use the terms “forward PEG” and some use the terms “trailing PEG” to distinguish between the calculation methods using future growth and historical growth.

The most popular way to compare two different stocks are to look at the P/E. You simply calculate it by taking the current price of the stock and divide it by the EPS. It tells you whether the stock is high or low relative to its earnings.

A stock with a high P/E is often considered as overpriced and that is probably right. It signals that the traders have pushed the stock price too high and above any reasonable near term growth that is probable.

However, a high P/E can also signal a strong vote of confidence that the company still has strong growth prospects in the future. This tells us that the stock price can go even higher.

Investors are usually more concerned about the future than the present. That`s why it is better to look at future earnings growth or the PEG ratio. You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG = P/E ratio / (projected growth in earnings)

For example:

P/E in Company A is 100, and projected earnings growth next year is 20%. PEG in this case is 5 (100 / 20 = 5). Like all other ratios, the number five in this case is just a number you can compare in relationship to others. The lower the number, the less you pay for each unit of future earnings growth. A company with a high P/E and a high projected earnings growth may be a good value.

A company that is not growing any more with a P/E of 10, and a low or no projected earnings growth, gives you a PEG like the P/E. This can tell you that the investment in here is very expensive.

Take a look at the chart below. I have compared Sony with Starbucks. People are not buying vinyl records or cd`s anymore. What do they buy? They simply buy coffee! Sony traded at $120 in year 2000, and now the stock is just below $20. By the way, do you know what company that is selling most cd`s in this world right now? Belive it or not; it is Starbucks!

SNE and SBUX

News today:

Core CPI & Retail Sales at 8:30am,

Existing Home Sales & Business Inventories at 10:00am,

Crude Oil Inventories at 10:30am,

Fed Meeting Minutes at 2:00pm.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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