Top Country PEG Ratios: Russia, Singapore, Malaysia

by: Bespoke Investment Group posted on: February 18, 2008 | about stocks: EWH / EWM / EWS / EZA / INP / RSX    
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Many investors look at a stock's PEG ratio as a valuation metric that takes growth expectations into account. The PEG ratio is a stock's P/E ratio divided by its estimated growth rate. Generally, a PEG of less than 1 is considered positive, because growth estimates are higher than the stock's P/E.

With that in mind, we created a PEG ratio for major countries using the P/E ratio of each country's major equity index and its estimated GDP growth in 2008. While some countries have a low P/E ratio, they also have low growth prospects (Spain and France), so their valuations are not as attractive. Countries that are the most attractive are ones with low P/E ratios and high GDP growth, giving them a low PEG ratio. Countries that are the least attractive have high P/E ratios and low growth prospects.

Below we highlight the country PEG ratios for 22 countries that have trackable ETFs. As shown, Russia tops the list with a P/E of 11.17 and estimated GDP growth of 6.8%. This gives Russia a country PEG of 1.64. Other countries with strong PEG ratios include Singapore, Malaysia, Hong Kong, India and South Africa. Unfortunately, the US is second to last on the list with a PEG of 10.26. The S&P 500's P/E ratio is 18.46, while its estimated GDP growth this year is 1.8%. The US is barely ahead of Japan, which is last on the list with a PEG of 10.31.

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This article has 5 comments:

  •  
    Kelleev
    Feb 18 09:18 AM
    Interesting research, but it lacks a very important piece of the puzzle... inflation. Growth is wonderful, but only if it outpaces inflation by a good margin. I don't know the inflation rates of these countries off the top of my head, but I believe China and Russia are over 10% annually; whereas the U.S. is still below 3% core inflation (that is, if you believe the CPI data).
  •  
    User 86999
    Feb 18 09:25 AM
    Even if you believe the CPI data, the missing energy and food components make it more like a fool's index instead. I hope the gov pays attention sometime, or better yet, perhaps an academic or commercial org will construct an index based on other raw components.
  •  
    huangthomas
    Feb 18 10:01 AM
    If the GDP data are from the World Bank, they have been adjusted for CPI (not core CPI) and PPP (Purchasing Power Parity).
  •  
    beezlebufo
    Feb 29 06:16 PM
    My Website
    thought provoking idea. i tweaked it a little bit using economist.com real gdp forecasts over 5 years and making an attempt at time biasing. There's some difference in the data because I'm sure I'm using a different source for gdp, but my top 5 came out Russia, Singapore, South Africa, Malaysia, South Korea.

    If you want to look at the full chart

    bucksblog.wordpress.co.../
  •  
    bobbobwhite
    Jul 01 12:12 PM
    Lots of variables to consider other than just PEG but it is a place to start research. To that end, I'm looking for a service that tracks the PEG of all stocks on the NYSE and NASDAQ on a daily basis. Anyone know if there is such a service? Thanks.
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