Definition

Price to PEG Without NRI Value is a valuation metric that adjusts the Price/Earnings to Growth (PEG) ratio by excluding Non-Recurring Items (NRI) from the earnings calculation. This provides a clearer picture of a company's valuation by focusing on its core earnings growth.

Formula

PEG Without NRI = (Price/Earnings Excluding NRI) / Earnings Growth Rate

How to use the valuation method

To use this valuation method, first calculate the company's earnings excluding any non-recurring items. Then, determine the company's earnings growth rate. Divide the price-to-earnings ratio (excluding NRI) by the earnings growth rate to get the PEG Without NRI. A lower PEG Without NRI suggests that the stock may be undervalued relative to its growth potential.

Which industries it work best in

This valuation method works best in industries with stable and predictable growth patterns, such as consumer staples and utilities, where non-recurring items are less frequent and less impactful on the overall earnings.

Which industries it does not apply to and why

Industries with volatile earnings and frequent non-recurring items, such as technology and biotech, may not be well-suited for this valuation method. The exclusion of non-recurring items can lead to an inaccurate representation of the company's financial health and growth prospects in these sectors.

Summary

Price to PEG Without NRI Value is a useful tool for evaluating a company's valuation by focusing on its core earnings growth, excluding non-recurring items. It is most effective in stable industries but may not provide an accurate picture in sectors with volatile earnings and frequent non-recurring items.