Intel,givenitsexpectedgrowthrate,isundervaluedbyalmost
33% on a PEG ratio basis, at least based on this regression.
As a final note, there is one other reason why Taiwan
SemiconductorlookscheaponaPEGratiobasis.Itisoneof
thefew emerging marketcompanies in this sectorand the
additionalriskassociatedwithitsstatusmaybedepressingits
P/E ratio.
ILLUSTRATION 8.4: Comparing P/BV Ratios across Banks
If the essence of misvaluation is finding firms that have
price-to-book ratiosthatdonot gowith their equityreturn
spreads,themismatchcanbebroughthomebyplottingthe
price-to-book value ratiosoffirms against their returns on
equity.InFigure8.10,wereportontheprice-to-bookratios
forbanks intheUnitedStatesin January 2006 againstthe
returnsonequityeachreportedoverthemostrecentfinancial
year.
FIGURE8.10Price-to-BookRatiosversusReturnonEquity:
U.S. Banks in January 2006