In estimating these PEG ratios, the analyst estimates of
growthinearningspershareoverthenextfiveyearsareused
inconjunctionwiththecurrentP/E.Anyfirm,therefore,that
hasnegativeearningspershareorlacksananalystestimateof
expectedgrowthisdroppedfromthesample.Thismaybea
sourceofbias,sincelargerandmoreliquidfirmsaremore
likely to be followed by analysts.
PEG ratiosare most widely used in analyzingtechnology
firms.Figure8.3containsthedistributionofPEGratiosfor
technology stocks in January 2006, again using analyst
estimatesofgrowthtoarriveatthePEGratios.Notethatof
the 516 technologyfirmsforwhichP/Eratioswereestimated,
only 279 havePEGratiosavailable;the 237 firmsforwhich
analyst estimates of growth were not available have been
dropped from the sample.