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Market Analysis

Small-cap shares most pricey (Live mint.com 4th Jan 2008)Is the amazing rise in small-cap stocks in line with the “fundamentals”? As it turns out, small-cap shares are the most expensive based on price-earnings to growth (PEG) ratio, which is simply the price-earnings (P-E) multiple divided by earnings growth.
Earnings of shares that comprise the Bombay Stock Exchange (BSE) small-cap index grew 19.6% in the September quarter, but their trailing 12-month P-E multiple was as high as 24.9, resulting in a PEG ratio of 1.3. Large-cap shares represented by the BSE 100 index had a PEG ratio of 1.1 and grew earnings by 23.8% (the P-E multiples mentioned above will differ slightly from those published by BSE because it excludes stocks on which year-on-year earnings growth data isn’t available).
The top performers were mid-cap shares, which grew earnings by as much as 37.1% and trade at a PEG ratio of just 0.7 times. Their fast-paced growth in earnings last quarter was no flash in the pan—in the past four quarters, their earnings grew by 52.5%, easily outpacing the 36.9% and 31.4% growth posted by large-cap and small-cap firms, respectively. More
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