WHAT ARE WE LOOKING FOR?
Today, let's look at the stocks trading at the greatest price-to-earnings growth, or PEG, discounts. We'll stick to companies in the S&P/TSX composite for the screen and we'll use Thomson ONE's Stock Reports Plus. This is the stock ideas feature we've been using all week that is inside Thomson Reuters' portfolio management tool used by institutional investors.
WHAT'S A PEG RATIO?
A stock's PEG tells investors how much they are paying for a stock's earnings growth. The PEG is calculated by taking the P/E and dividing it by the annual earnings growth. If a company's P/E is 20, then the earnings would have to be growing at 20 per cent for the PEG ratio to be 1. If the P/E is 10, then the PEG is 0.5. If the P/E is 40, then the PEG is 2. A lower ratio means the stock is cheaper.
Today we'll use the forward PEG, which uses earnings estimates for the next 12 months to calculate the P/E and expected earnings growth rate.
MORE ABOUT TODAY'S SCREEN
We'll look at the cheapest PEG stocks based on how great a discount they are trading at, relative to the average of the composite. As well, we'll look at the company's historical discounts or premiums to the average of the composite over the past five years. In the table, here is what Thomson says each header under “Relative to S&P/TSX composite (5-Year Range)” means:
a) The average value is the average of the weekly comparisons between the company and the index for the past five years (not merely the comparison of the company average to the index average);
b) The high value is the greatest difference between the company and the index measures in the past five years (not merely the comparison of the company high to the index high, as the highs may have occurred at different times);
c) The low value is the smallest difference between the company and the index measures in the past five years (not merely the comparison of the company low to the index low, as the lows may have occurred at different times).
WHAT DID WE FIND OUT?
Several companies are trading at significantly greater-than-usual discounts to the average composite PEG of the past five years. Companies such as Centerra Gold, Nexen and Rogers Communications are used to trading at premiums.
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Table: View result set 
