justin s
I agree with most of your post, especially that it's important to use discretion in estimating forward growth, which I mentioned in my example.
But how Yahoo Finance thinks they can estimate GE or IBM's forward growth over a 5 year period into the future when the CEO's and CFO's of those same companies would be hard pressed to do the same is beyond me. My guess is they use some element of historic growth to project future growth- which then distracts from what a PEG is all about in the first place.
As for the validity of the numbers on Yahoo Finance, they're notoriously suspect based on my experience. I never (and I mean never) take Yahoo's numbers for granted- I get the numbers for valuation off SEC filings...and it's amazing how often Yahoo gets it wrong.
But back to NFEC, that PEG is based on a combination that takes into consideration their most recent quarter, and the forward information for their next two quarters that they've revealed in the last 2 months. It's a shorter time frame, and may not be what their growth will be in 2011 or 2012, but I believe it's an accurate, (if not conservative) estimate for the next 6 months of growth.
My personal experience has been that by calculating a PEG based on a shorter time frame of 6 months into the future- you can pretty much nail it when the company is transparent and has pr'd their next 3-6 months of growth as in NFEC's case. In short, the farther out you go, the less accurate the PEG will be based on an increasing number of unknowns.
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