Definition

Price to Earnings Growth (PEG) Value Without NRI is a valuation metric that adjusts the traditional PEG ratio by excluding non-recurring items (NRI) from the earnings. This provides a clearer picture of a company's growth potential by focusing on its core earnings.

Formula

PEG Value Without NRI = (Price / (Earnings - NRI)) / Earnings Growth Rate

How to use the valuation method

To use this valuation method, calculate the company's earnings excluding non-recurring items, then divide the stock price by these adjusted earnings. Finally, divide this result by the expected earnings growth rate. A PEG value below 1 may indicate that the stock is undervalued relative to its growth potential, while a value above 1 might suggest overvaluation.

Which industries it work best in

The PEG Value Without NRI works best in industries with stable and predictable growth patterns, such as consumer staples and utilities, where non-recurring items are less frequent and growth rates are more consistent.

Which industries it does not apply to and why

This metric may not be as effective in industries with volatile earnings or frequent non-recurring items, such as technology or biotech, where growth rates can be unpredictable and non-recurring items can significantly distort earnings.

Summary

The PEG Value Without NRI is a useful tool for evaluating a company's valuation relative to its growth potential by focusing on core earnings. It is particularly effective in stable industries but may not be suitable for sectors with volatile earnings or frequent non-recurring items.