Uploaded March 2026 | Updated September 2026, 1 week ago
In this session, we look at screening stocks to find stocks where growth is being priced too low by markets. We first look at earnings growth screens, where you pick stocks that have either high past earnings growth or high earnings growth expected in the future, and note that neither screen has done well in delivering returns. We then focus on investing in high PE ratio stocks, a strategy that has done badly over long time periods, but that does offer high returns in sub-periods. Finally, we look at screens that incorporate both PE and growth, either by looking for companies that trade at PE ratios that are less than their expected growth rates, or by looking for companies that trade at low ratios of PE to growth rates (PEG ratios).
Playlist for class (Intro + 42 sessions): youtube.com/playlist?list=PLUkh9m2BorqnZGADa8cTzeJblmrZY_SqP&si=zI2pk17pJeld4nWR
Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilslides25/session18.pdf
Post-class test: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session18test.pdf
Post-class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session18soln.pdf
In this session, we look at screening stocks to find stocks where growth is being priced too low by markets. We first look at earnings growth screens, where you pick stocks that have either high past earnings growth or high earnings growth expected in the future, and note that neither screen has done well in delivering returns. We then focus on investing in high PE ratio stocks, a strategy that has done badly over long time periods, but that does offer high returns in sub-periods. Finally, we look at screens that incorporate both PE and growth, either by looking for companies that trade at PE ratios that are less than their expected growth rates, or by looking for companies that trade at low ratios of PE to growth rates (PEG ratios).
Playlist for class (Intro + 42 sessions): youtube.com/playlist?list=PLUkh9m2BorqnZGADa8cTzeJblmrZY_SqP&si=zI2pk17pJeld4nWR
Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilslides25/session18.pdf
Post-class test: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session18test.pdf
Post-class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session18soln.pdf
