Q: Good morning,
A follow-up question to Angus’ question from yesterday about the P/E and PEG of these three companies…
As I understand the PEG ratio, a PEG under 1 suggests the stock is undervalued for its expected level of growth and over 1 suggests overvalued. So would you interpret these three PEG ratios that WSP is currently overvalued? If you were adding to these three, all other things being equal, would you be least likely to add to WSP, adding to the other two first as they have a a better current value?
Thank you for your insights in these early learning days of my investing journey…
Doris
A follow-up question to Angus’ question from yesterday about the P/E and PEG of these three companies…
As I understand the PEG ratio, a PEG under 1 suggests the stock is undervalued for its expected level of growth and over 1 suggests overvalued. So would you interpret these three PEG ratios that WSP is currently overvalued? If you were adding to these three, all other things being equal, would you be least likely to add to WSP, adding to the other two first as they have a a better current value?
Thank you for your insights in these early learning days of my investing journey…
Doris
5i Research Answer:
We think ATS and TFII look better than WSP today, but not really because of the peg ratio. The peg is just one consideration. WSP is not cheap in the typical sense, but gets a premium valuation (and thus a higher peg) because of its large backlog of business. Its current backlog is close to $14B, providing about 16 months of revenue if business completely stopped today. ATS does have a backlog, but TFII's business can change much more rapidly than either.