Taking a look at D.R. Horton, Inc. (NYSE:DHI)’s valuation level, we can focus on several ratios. One of the quickest ways to determine the projected value of a stock is the price to earnings growth, or PEG ratio.
This formula was popularized by Peter Lynch and according to his calculations, a stock which is fairly valued will have a price to earnings ratio equal to its rate of growth. Simply put, a stock with a PEG ratio of 1 would be considered fairly valued. A stock with a ratio of under 1.0 would be undervalued and a stock with a PEG over 1.0 would be considered over valued. D.R. Horton, Inc. currently has a PEG ratio of 1.44.It can be very difficult to keep emotions on the sidelines when making important investing decisions. Even if all the number crunching is done unemotionally, there may be a tendency for those feelings of excitement or dread to creep in. Once the trade is made, it can be super difficult to make sane decisions when markets go haywire. Investors may have made some trades that didn’t pan out as planned, and they may have the itch to sell quickly in order to stop further losses. Selling a stock just because it is going down or buying a stock just because it is going up, might lead to portfolio struggles in the future. Obtaining a grasp on the bigger picture may help investors see through the cloudiness and make clearer decisions when the time comes.
Most importantly investors want to know where the stock is headed from here. In order to get a sense of Wall Street sentiment, we can look to equity research analyst estimates. On a one to five ratings scale where 1.0 indicates a Strong Buy, 2.0 indicates