Wendy Tan asked 2 years 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..."
- 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.
- 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?
1 Answers
Victor Chng answered 2 years 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.
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