Question

3. The following table shows historical and projected annual earnings growth rates. DuPont Dow PPG 5-Year Historic Earnings Growth Rates -2.43% 17.39% 10.36% 5-Year Projected Earnings Growth Rates 8.06% 6.96% 9.54% Calculate PE to earnings growth rates (PEG), using the information above and calculations from Question 2. Current PE/5-Yr Historic 1-Yr Ahead PE Forecast / S-Yr Growth Projected Growth -3.321 0.40 2-Yr-Ahead PE Forecast/5- Yr Projected Growth 2.41 2.04 DuPont Dow PPG Classify these companies by cell (1 to 9) based on the PEG matrix. Assume that the average PE is 20 and the average earnings growth is 9.6% High Growth Average Growth (9.6%) Low Growth High PE 1. PEG - 2.08 or greater 4. PEG > 2.08 7. PEG > 2.08 Average PE (20) 2. PEG - 2.08 or less 5. PEG = 2.08 8. PEG > 2.08 Low PE 3. PEG <2.08 6. PEG < 2.08 9. PEG2.08 or less DuPont Dow PPG

Answer 1

	5-Year Historic Earning Growth Rates	5-Year Projected Earning Growth Rates
DuPont	-2.43%	8.06%
Dow	17.39%	6.96%
PPG	10.36%	9.54%
	Current PE / 5 Yr- Historic Growth	1 Yr Ahead PE Forecast / 5 Yr- Projected Growth	1 Yr Ahead PE Forecast / 5 Yr- Projected Growth
DuPont	-3.32	2.57	2.41
Dow	0.4	2.21	2.04
PPG	0.92	1.83	1.66
	Current PE	1 Yr Ahead PE Forecast	1 Yr Ahead PE Forecast
DuPont	8.07	20.71	19.42
Dow	6.96	15.38	14.20
PPG	9.53	17.46	15.84
	High P/E	Average P/E	Low P/E
High Growth	1. PEG > = 2.08	2. PEG <= 2.08	3. PEG < 2.08
Average Growth	4. PEG > 2.08	5. PEG = 2.08	6. PEG < 2.08
Low Growth	7. PEG > 2.08	8. PEG > 2.08	9. PEG = 2.08 or less
DuPont	Cheap	Expensive	Expensive
Dow	Cheap	Expensive	Expensive
PPG	Cheap	Cheap	Cheap