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PBV-ROE Matrix
Growth-Duration Matrix
PBV-ROE Matrix
LOW
Growth-Duration Matrix
High
Expected 5-Yr EPS Growth Low
Undervalued
Promises of growth
Dividend cows
Overvalued
Low
High
ERI =
(Acceleration ratio)
ERI Illustration
Omegas price per share Omegas operating cash flow
(before growth investment)
= Rs.150
= 15 percent
= 20 percent
= 50 percent
ERI Illustration
Omegas base line value =
Rs.10 0.15
= Rs.66.7
150 66.7 150
= 0.56
Acceleration ratio =
ERI = 0.56 x 1.25 = 0.70
1.50 1.20
= 1.25
In general, the lower (higher) the ERI, the greater (smaller) the chance of achieving expectations and the higher (lower) the expected return for investors.
investment proposition.
A PEG of less than 0.33 suggests that the stock is an unusually attractive investment proposition.
Thus, the lower the PEG ratio, the greater the investment
attractiveness of the stock. Growth-at-a-reasonable price (GARP) investors generally shun stocks with PEG ratios significantly greater than 1.
Return on Equity
PAT ROE = Sales x Assets Sales x Equity Assets
Asset Turnover
Leverage
Return on Equity
PBIT
ROE = Sales x Assets
sales
x
PBT
x PBIT
PAT
x PBT
Assets
Net Worth
Thus, ROE = PBIT efficiency * asset turnover ratio *interest burden* tax burden *leverage