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(Sigh) Working with these numbers is SO haaarrrddd.....

CrashCrash
in Off-Topic
...I've been looking, but not very hard, to find a Lewis Black excerpt I've seen before, in which he mimics the government workers (like CONGRESS!?) who can't produce a budget, because "all this MATH... is sooooo HAAAARRRDD!"

..."But that's not what I came to tell you about." (-Arlo Guthrie.)
I came in here to ask if someone could explain the meaning of a term or two. Like, for instance, "Projected EPS Growth over the next 5 years," as it appears in the M* "Instant X-Ray." My portf. is estimated by M* to produce EPS over that period which is specified as 10.66. Relative to the S&P, M* says that figure comes to 1.04.

Huh? This might as well be written in Russian. I never learned Russian. Pity. They got some pretty women over there, though. Can anyone attempt an explanation of this item for me--- a man who barely passed basic algebra--- as if algebra actually MATTERED to anyone? Thanks ever so much.

Comments

  • jerry
    Maybe these links will help.Unfortunately I have not used morningstar x ray but i would guess 1.o4 may mean a growth rate 4% higher than the S+P

    http://socialize.morningstar.com/NewSocialize/forums/t/263542.aspx

    http://socialize.morningstar.com/NewSocialize/forums/t/202865.aspx
  • CharlesCharles
    edited March 2014
    Hmmm...I'll try, but hopefully others can spot me:

    EPS is short for earnings per share. Now, I believe the M* X-ray evaluation quotes EPS growth, which is the percentage growth in earnings, or EPS, each year over the next 5 years for the composite of holdings in your portfolio.

    At 10.66%, that level is about 4% higher than what the composite S&P500 expects to grow by, which is reflected in the 1.04 ratio value. I believe that the S&P500 is expected to grow at about 10.3%. So, very close to what is in your portfolio.

    Not to confuse you more, but Peter Lynch would compare growth rate to current year price to earnings (P/E) ratio as a quick check of whether a stock was fairly valued:

    "The P/E ratio of any company that's fairly priced will equal its growth rate" (ie., have a price to earnings divided by earnings growth, or PEG, ratio = 1). He explained that when PEG gets over 2, he would get very concerned that the stock was well over valued.

    Let's do quick check of S&P500: current P/E = 15.9 and EPS growth = 10.3%, so PEG = 1.54, which suggests it may be getting a bit pricey.

    Hope that helps.
  • CrashCrash
    Yes, it does help. I understand that some actual THINKING is involved. I'll never understand the process of getting to those figures, but your explanations and links do help. Thank you.
  • CharlesCharles
    Honestly, I always get confused between "Price/Prospective Earnings" versus "Forward Price/Earning" versus "Current Price/Earnings" versus "Trailing Price/Earnings" versus "Price/Earnings TTM (Trailing Twelve Months)" etc, etc. Endless variations here.
  • rjb112
    "Price/Prospective Earnings" and "Forward Price/Earnings" should be two terms for the exact same thing.

    "Trailing Price/Earnings" and "Price/Earnings TTM (Trailing Twelve Months)" should also be terms for the same exact thing.

    "Current Price/Earnings" should mean the price per share divided by the most current earnings per share (earnings/share of the most recently reported quarter).

    Anyone see this differently?



  • CharlesCharles
    Thanks man.
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