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QuestionsCategory: Entry StrategiesGoodpack Case Study
Wendy Tan asked 4 months ago
Hi Victor, "...Goodpack was trading around $1.80 a share. With an EPS of 9 cents, that meant Goodpack’s P/E was 20. We felt it was overvalued and decided not to invest..."
  1. Since Goodpack was in growing industry, will PEG ratio reveal that its undervalued instead? If based on net profit growth which its around 29%, PEG result will be less than 1. 
  2. How was it concluded that Goodpack was overvalued? Was it based on comparing the current P/E with its average P/E or comparing with industry standard. Why wasn't the intrinsic value determined?
Thank you for your time! regards, wendy
1 Answers
Victor Chng answered 4 months ago
Hi Wendy,   Goodpack was a stock that we own back in around 2011/2012.  At that point in time, the way we valued stocks was different from the method we are teaching you now.    We based a lot on the DCF method. If the current method of valuation is applied to Goodpack at that point in time, I will say they are probably fairly valued, because the company average PE is around 19x.