The primary reason that we utilize our blended P/E ratio concept is because we believe it is the most accurate calculation of the company’s current P/E ratio in order to determine fair value. Here is an explanation from the F.A.S.T. Graphs™ FAQ section of our website:

What does it mean when you say a blended P/E ratio?

One of the simplest and most commonly used ways to determine the value of a publicly-traded business is by checking the company's P/E ratio. The formula is very simple, it is simply the current price (P) divided by earnings (E). At first glance, this seems simple enough, but often it is not as simple as it appears.

The company's stock price is reported in real time on most financial websites that offer a quoting service. But businesses only report earnings on a quarterly basis. Consequently, when we are between the quarterly reports, we really don't have a precise earnings figure upon which to calculate the P/E ratio.

As a result, not all financial websites report the P/E ratio on the same basis. Some will report P/E ratios based on trailing twelve month earnings (ttm), others might report the P/E ratio based on forward earnings, and some will report P/E ratios on both.

Unfortunately, this can lead to a common mistake that is often made when looking at a P/E ratio on a quoting service. The price or numerator (the top number) is current and accurate. However, it is the earnings or the denominator (the bottom number) that can be problematic. If you are using trailing earnings (ttm), your denominator might be too small, thereby causing the P/E ratio to be higher than it really is. If you are using forward earnings, they might not manifest as expected, thereby causing the denominator to be too large, which makes the P/E ratio calculation look lower than it truly is.

Consequently, FAST Graphs calculates the current P/E ratio by taking a blended approach. Admittedly, like the trailing or forward calculations, a blended P/E ratio might not be perfectly accurate either.

However, we do believe that a blended P/E ratio calculation will be more precise than the two other alternatives. Trailing twelve months' earnings can be getting stale, especially when we are in the late innings of the next quarter. Earnings estimates out to the next year may be too optimistic. However, giving credit to the current quarter's earnings estimates are more likely to be realistic or close to it.

Therefore, by blended P/E ratio, we mean a weighted average of the most recent actual reported earnings plus the closest quarterly forecast earnings. This gives the most weight to the past "actual" reported earnings, but also includes an appropriate consideration of the company's continuing earnings power post their last report. For most companies, the blended P/E ratio calculation will be using a moderately higher denominator than trailing twelve months. In other words, we believe the blended P/E ratio calculation is based on a more current level of earnings.

Additionally, you also have to be cognizant of which earnings metric that the P/E ratio is being calculated upon. F.A.S.T. Graphs™ defaults to and utilizes operating earnings to calculate our blended P/E ratio.

However, subscribers also have access to four additional earnings metrics as follows: Normalized Basic Tax-Adjusted Earnings, Normalized Basic Earnings, Basic Earnings and Diluted Earnings (GAAP). We also offer calculations based on Cash Flow or FFO and AFFO for REITs]]>

The primary reason that we utilize our blended P/E ratio concept is because we believe it is the most accurate calculation of the company’s current P/E ratio in order to determine fair value. Here is an explanation from the F.A.S.T. Graphs™ FAQ section of our website:

What does it mean when you say a blended P/E ratio?

One of the simplest and most commonly used ways to determine the value of a publicly-traded business is by checking the company's P/E ratio. The formula is very simple, it is simply the current price (P) divided by earnings (E). At first glance, this seems simple enough, but often it is not as simple as it appears.

The company's stock price is reported in real time on most financial websites that offer a quoting service. But businesses only report earnings on a quarterly basis. Consequently, when we are between the quarterly reports, we really don't have a precise earnings figure upon which to calculate the P/E ratio.

As a result, not all financial websites report the P/E ratio on the same basis. Some will report P/E ratios based on trailing twelve month earnings (ttm), others might report the P/E ratio based on forward earnings, and some will report P/E ratios on both.

Unfortunately, this can lead to a common mistake that is often made when looking at a P/E ratio on a quoting service. The price or numerator (the top number) is current and accurate. However, it is the earnings or the denominator (the bottom number) that can be problematic. If you are using trailing earnings (ttm), your denominator might be too small, thereby causing the P/E ratio to be higher than it really is. If you are using forward earnings, they might not manifest as expected, thereby causing the denominator to be too large, which makes the P/E ratio calculation look lower than it truly is.

Consequently, FAST Graphs calculates the current P/E ratio by taking a blended approach. Admittedly, like the trailing or forward calculations, a blended P/E ratio might not be perfectly accurate either.

However, we do believe that a blended P/E ratio calculation will be more precise than the two other alternatives. Trailing twelve months' earnings can be getting stale, especially when we are in the late innings of the next quarter. Earnings estimates out to the next year may be too optimistic. However, giving credit to the current quarter's earnings estimates are more likely to be realistic or close to it.

Therefore, by blended P/E ratio, we mean a weighted average of the most recent actual reported earnings plus the closest quarterly forecast earnings. This gives the most weight to the past "actual" reported earnings, but also includes an appropriate consideration of the company's continuing earnings power post their last report. For most companies, the blended P/E ratio calculation will be using a moderately higher denominator than trailing twelve months. In other words, we believe the blended P/E ratio calculation is based on a more current level of earnings.

Additionally, you also have to be cognizant of which earnings metric that the P/E ratio is being calculated upon. F.A.S.T. Graphs™ defaults to and utilizes operating earnings to calculate our blended P/E ratio.

However, subscribers also have access to four additional earnings metrics as follows: Normalized Basic Tax-Adjusted Earnings, Normalized Basic Earnings, Basic Earnings and Diluted Earnings (GAAP). We also offer calculations based on Cash Flow or FFO and AFFO for REITs]]>

Here is a link to Why FAST Graphs Reports Five Versions Of Earnings found under our “Help-FAQs” tab of the website:

http://tinyurl.com/h94...

Kindest Regards,

Polly

Team FAST Graphs]]>

Here is a link to Why FAST Graphs Reports Five Versions Of Earnings found under our “Help-FAQs” tab of the website:

http://tinyurl.com/h94...

Kindest Regards,

Polly

Team FAST Graphs]]>

When reviewing the payout ratio on the historical graph, the price scale to the left is not actually relevant. The graphical depiction of the payout ratio on the historical graph is simply a pictorial expression. In other words, the area below the pink line in the green shaded area (earnings) represents the portion of earnings paid out. Therefore, it produces a visual perspective of the payout ratio.

When a FAST Graph is put in an article it is essentially a picture, or what we like to think of as a dead graph. Therefore, you are correct that the research tool does work differently on the website with live graphs. Each symbol graphed automatically produces a performance report and included on that report is a dividend payout ratio column which reflects the payout ratio as a percentage (in numerical form).

We hope this clarifies things for you.

The FAST Graphs Team]]>

When reviewing the payout ratio on the historical graph, the price scale to the left is not actually relevant. The graphical depiction of the payout ratio on the historical graph is simply a pictorial expression. In other words, the area below the pink line in the green shaded area (earnings) represents the portion of earnings paid out. Therefore, it produces a visual perspective of the payout ratio.

When a FAST Graph is put in an article it is essentially a picture, or what we like to think of as a dead graph. Therefore, you are correct that the research tool does work differently on the website with live graphs. Each symbol graphed automatically produces a performance report and included on that report is a dividend payout ratio column which reflects the payout ratio as a percentage (in numerical form).

We hope this clarifies things for you.

The FAST Graphs Team]]>

Thanks for the editing help - we appreciate it.

The FAST Graphs Team]]>

Thanks for the editing help - we appreciate it.

The FAST Graphs Team]]>

No offense taken. However, you are clearly an investor that uses technical analysis. FAST Graphs are a fundamental analyzer software tool that focuses on the business behind the stock. Of course, technical analysis focuses on the stock price.

Therefore, no offense to you either, but we consider technical charts based on attempting to forecast price movement "as woeful a charting product as I (we) have ever seen."

All the best,

The FAST Graphs Team]]>

No offense taken. However, you are clearly an investor that uses technical analysis. FAST Graphs are a fundamental analyzer software tool that focuses on the business behind the stock. Of course, technical analysis focuses on the stock price.

Therefore, no offense to you either, but we consider technical charts based on attempting to forecast price movement "as woeful a charting product as I (we) have ever seen."

All the best,

The FAST Graphs Team]]>

With regard to dividend growth, we were merely pointing out that railroads often have large and reoccurring capital expenses. As such, despite the payout ratio being on the lower end of the spectrum, you might not expect much payout expansion. Instead, dividend growth in line with earnings growth over the long-term may be a prudent expectation. ]]>

With regard to dividend growth, we were merely pointing out that railroads often have large and reoccurring capital expenses. As such, despite the payout ratio being on the lower end of the spectrum, you might not expect much payout expansion. Instead, dividend growth in line with earnings growth over the long-term may be a prudent expectation. ]]>

Here's all we're suggesting: using a 7% expected compound growth rate is not the same as requiring a minimum 7% increase. As such, for a long-term investor not living off the income, when making a rational forecast one need not limit themselves in such a way. Thus the fact that only 3 companies raised their payouts by at least 7% for at last 22 years isn't necessarily telling. The important part is whether or not it's reasonable to make an assumption about average compound growth. ]]>

Here's all we're suggesting: using a 7% expected compound growth rate is not the same as requiring a minimum 7% increase. As such, for a long-term investor not living off the income, when making a rational forecast one need not limit themselves in such a way. Thus the fact that only 3 companies raised their payouts by at least 7% for at last 22 years isn't necessarily telling. The important part is whether or not it's reasonable to make an assumption about average compound growth. ]]>

However, we would like to make an important note. Raising the dividend by at least 7% a year is a more stringent qualification than increasing a company's payout by a 7% compound rate. In the latter the increases could jump around quite a bit (5%, 18.2%, 4.8%, 20%, etc.) and still meet the end income mark. It is true that the compound increase will be lower than the average increase. Yet keep in mind that many would much prefer a long-term compound growth rate of say 8% over constant 7% increases, even if that means having a few payout increases below an arbitrary threshold. ]]>

However, we would like to make an important note. Raising the dividend by at least 7% a year is a more stringent qualification than increasing a company's payout by a 7% compound rate. In the latter the increases could jump around quite a bit (5%, 18.2%, 4.8%, 20%, etc.) and still meet the end income mark. It is true that the compound increase will be lower than the average increase. Yet keep in mind that many would much prefer a long-term compound growth rate of say 8% over constant 7% increases, even if that means having a few payout increases below an arbitrary threshold. ]]>

Your emphasis on inflation is important. However, keep in mind that initial payout has a large impact as well. For instance, you could have a 0.5% yield that trounces inflation every year but would still lose out on an income basis to something like T. Obviously KO / PG and those types of companies have higher payouts, but the concept still holds. Its important to underscore that while you might expect KO to beat T on a nominal basis in 20-30 years this is in no way guaranteed.

With respect to "anemic" growth, we tend to agree - T has been increasing its payout by just a penny per quarter for the last 6 years and thus the rate of growth is continuing to slow. Yet again, this is less worrisome with a 5%+ yield as it would be with say a 2 or 3% yield. High yield can make up for low growth.

In regards to the business model, this is certainly a legitimate concern and should always be well monitored. No matter how high the yield, you want sustainability. Thanks for reading! ]]>

Your emphasis on inflation is important. However, keep in mind that initial payout has a large impact as well. For instance, you could have a 0.5% yield that trounces inflation every year but would still lose out on an income basis to something like T. Obviously KO / PG and those types of companies have higher payouts, but the concept still holds. Its important to underscore that while you might expect KO to beat T on a nominal basis in 20-30 years this is in no way guaranteed.

With respect to "anemic" growth, we tend to agree - T has been increasing its payout by just a penny per quarter for the last 6 years and thus the rate of growth is continuing to slow. Yet again, this is less worrisome with a 5%+ yield as it would be with say a 2 or 3% yield. High yield can make up for low growth.

In regards to the business model, this is certainly a legitimate concern and should always be well monitored. No matter how high the yield, you want sustainability. Thanks for reading! ]]>

However, keep in mind that the statement you referred to is simply indicating possible math and not an absolute. Said differently, anything could happen in the future. While its possible that KO and PG provide more nominal income in 22 years, this is in no way guaranteed. Moreover, even if this comes to fruition, it still might be the case that T provides more income via the early reinvestment of larger payouts. Our advice is to simply do the math, come to it with rational (if not understated) expectations and determine a path going forward. As you note, it doesn't have to be an "either or" game. Many investors are perfectly happy by owning a combination of varying yield and expected growth securities.]]>

However, keep in mind that the statement you referred to is simply indicating possible math and not an absolute. Said differently, anything could happen in the future. While its possible that KO and PG provide more nominal income in 22 years, this is in no way guaranteed. Moreover, even if this comes to fruition, it still might be the case that T provides more income via the early reinvestment of larger payouts. Our advice is to simply do the math, come to it with rational (if not understated) expectations and determine a path going forward. As you note, it doesn't have to be an "either or" game. Many investors are perfectly happy by owning a combination of varying yield and expected growth securities.]]>

What you are describing is precisely the reason that using F.A.S.T. Graphs comes in handy. If you were to view most financial websites you would regularly see the price-only view that we presented with the first graph. As such, you would indeed see that the share price barely moved in the last decade and perhaps come to the same conclusion you have drawn.

Yet this is missing the point quite exactly. In the remaining graphs we presented the “business behind the stock” along with the relationship between earnings and price. Note that in the early 2000’s MDT traded at 40+ times earnings. Even if the company performed quite well (which it did) it’s tough to recover from those types of expectations. Conversely, today the company trades at about 16 times earnings. Think of it this way: earnings grew from $1.20 to $4, yet the price was effectively inert – something must have caused this.

In effect, the reason that MDT was a “lousy stock” was due to the excessive valuation at the beginning of the period and not the underlying business. The share price more or less stagnated for years until it “caught up with” the business performance. Today, as alluded to in the article, we believe MDT is trading within a reasonable range of appropriateness in comparison to its underlying earnings power. That is, in contrast to the early 2000’s, over the very long-term we would expect performance results to roughly track business results. ]]>

What you are describing is precisely the reason that using F.A.S.T. Graphs comes in handy. If you were to view most financial websites you would regularly see the price-only view that we presented with the first graph. As such, you would indeed see that the share price barely moved in the last decade and perhaps come to the same conclusion you have drawn.

Yet this is missing the point quite exactly. In the remaining graphs we presented the “business behind the stock” along with the relationship between earnings and price. Note that in the early 2000’s MDT traded at 40+ times earnings. Even if the company performed quite well (which it did) it’s tough to recover from those types of expectations. Conversely, today the company trades at about 16 times earnings. Think of it this way: earnings grew from $1.20 to $4, yet the price was effectively inert – something must have caused this.

In effect, the reason that MDT was a “lousy stock” was due to the excessive valuation at the beginning of the period and not the underlying business. The share price more or less stagnated for years until it “caught up with” the business performance. Today, as alluded to in the article, we believe MDT is trading within a reasonable range of appropriateness in comparison to its underlying earnings power. That is, in contrast to the early 2000’s, over the very long-term we would expect performance results to roughly track business results. ]]>

Ordinarily the "normal" or average P/E is drawn on the graphs as a blue line. In this particular case, we elected to take this out of the presentation. The reasoning was that MDT traded at a higher P/E for the first half of the graph and a lower P/E for second half. Specifically, the normal P/E on the default MDT graph for the time period shown would be 23.2. This is mathematically correct; however, this wouldn't necessarily reveal that much as shares of Medtronic haven't traded at that level since 2007.

If a subscriber were to draw a graph beginning in 2007, the normal P/E would be about 15 - close to where shares presently trade. More recent graphs would have lower P/E ratios. In our view the Estimated Earnings and Return Calculator provides a reasonable baseline for how analysts are viewing the company moving forward, while the Price and Earnings Correlated graph demonstrates the past relationship between the business and share price. ]]>

Ordinarily the "normal" or average P/E is drawn on the graphs as a blue line. In this particular case, we elected to take this out of the presentation. The reasoning was that MDT traded at a higher P/E for the first half of the graph and a lower P/E for second half. Specifically, the normal P/E on the default MDT graph for the time period shown would be 23.2. This is mathematically correct; however, this wouldn't necessarily reveal that much as shares of Medtronic haven't traded at that level since 2007.

If a subscriber were to draw a graph beginning in 2007, the normal P/E would be about 15 - close to where shares presently trade. More recent graphs would have lower P/E ratios. In our view the Estimated Earnings and Return Calculator provides a reasonable baseline for how analysts are viewing the company moving forward, while the Price and Earnings Correlated graph demonstrates the past relationship between the business and share price. ]]>

First, a subscriber has the option of viewing both basic and diluted earnings per share - which come directly from the company's financial statements.

Next, S&P reports "Normalized Basic Earnings" which takes out extraordinary or non-reoccurring events. To standardize this metric, each company is assumed to have the same 37.5% tax rate, regardless of the actual tax they might pay.

Finally, F.A.S.T. Graphs provides an adjustment to S&P's "normalized" calculation to use the tax rate actually paid. This is the metric that is being utilized in the above graphs. As you noted it can differ from other reported metrics, but in general we feel that it usually describes the underlying earnings power of a company quite well.

In sum, a F.A.S.T. Graphs subscriber has the ability to view companies with a variety of different metrics. The one utilized in this article was "Normalized Basic Tax-Adjusted" earnings. We hope this information is helpful and we appreciate you giving us the opportunity to explain this feature.]]>

First, a subscriber has the option of viewing both basic and diluted earnings per share - which come directly from the company's financial statements.

Next, S&P reports "Normalized Basic Earnings" which takes out extraordinary or non-reoccurring events. To standardize this metric, each company is assumed to have the same 37.5% tax rate, regardless of the actual tax they might pay.

Finally, F.A.S.T. Graphs provides an adjustment to S&P's "normalized" calculation to use the tax rate actually paid. This is the metric that is being utilized in the above graphs. As you noted it can differ from other reported metrics, but in general we feel that it usually describes the underlying earnings power of a company quite well.

In sum, a F.A.S.T. Graphs subscriber has the ability to view companies with a variety of different metrics. The one utilized in this article was "Normalized Basic Tax-Adjusted" earnings. We hope this information is helpful and we appreciate you giving us the opportunity to explain this feature.]]>

While we default to operating earnings - and feel that this usually describes the underlying earnings power of a given business quite well - it should be underscored that F.A.S.T. Graphs is a "tool to think with." In other words, the graphs allow a subscriber to quickly and efficiently review both the historical performance of the business along with how analysts are presently viewing the company. However, it's up to the individual to formulate their own conclusions.

In doing so, it's paramount to look at a variety of different metrics - including operating earnings, operating cash flows and a plethora of additional options like free cash flow, equity, debt, capital expenditures, revenues, margins, liquidity and other valuation ratios. More than that, we also recommend that an investor complete his or her own thorough due diligence on a potential investment.

In short, F.A.S.T. Graphs defaults to operating earnings and we believe that this often gives a reasonable view of a specific company. (As such, most articles also default to this metric) Yet that is certainly not to suggest that it is the only mnemonic worth viewing. Operating Cash Flows (along with others) are perfectly rational and might even provide a better view in some cases. Your description of utilizing Operating Cash Flows is precisely why F.A.S.T. Graphs was created. It is simply a tool to assist in the process and as such we also recommend that the subscriber utilize various metrics.

We hope this was helpful, thanks for your question! ]]>

While we default to operating earnings - and feel that this usually describes the underlying earnings power of a given business quite well - it should be underscored that F.A.S.T. Graphs is a "tool to think with." In other words, the graphs allow a subscriber to quickly and efficiently review both the historical performance of the business along with how analysts are presently viewing the company. However, it's up to the individual to formulate their own conclusions.

In doing so, it's paramount to look at a variety of different metrics - including operating earnings, operating cash flows and a plethora of additional options like free cash flow, equity, debt, capital expenditures, revenues, margins, liquidity and other valuation ratios. More than that, we also recommend that an investor complete his or her own thorough due diligence on a potential investment.

In short, F.A.S.T. Graphs defaults to operating earnings and we believe that this often gives a reasonable view of a specific company. (As such, most articles also default to this metric) Yet that is certainly not to suggest that it is the only mnemonic worth viewing. Operating Cash Flows (along with others) are perfectly rational and might even provide a better view in some cases. Your description of utilizing Operating Cash Flows is precisely why F.A.S.T. Graphs was created. It is simply a tool to assist in the process and as such we also recommend that the subscriber utilize various metrics.

We hope this was helpful, thanks for your question! ]]>

Your questions are good ones and all stem from the way in which the new version of F.A.S.T. Graphs currently presents data. Once the transition is in full force, we believe the answers to your questions will effectively answer themselves. However, in the meantime, we would like to provide you with some updates.

With our previous database we were given an earnings mnemonic called "operating earnings" which we believed provided a very good indication of the underlying earnings power of the company in which you were viewing. With the new database, S&P uses the name "Normalized Earnings" to describe this underlying earnings power. This metric is calculated as "Earnings Before Taxes excluding unusual items" multiplied by the tax rate. In order to keep the calculation standardized, S&P used a constant 37.5% tax rate for all companies. However, we found that this usually overstated a company's effective tax rate and consequently understated the earnings. Thus we have adjusted the normalized earnings reported to us to account for the company's actual effective tax rate. This will become the default option shortly, with the other options still available for viewing. We believe this metric will closely replicate the operating earnings mnemonic of the "old" F.A.S.T. Graphs.

Yes, we intend on adding a comprehensive glossary of terms.

We are working to update / enhance the calculator feature.

For the most part, historical dividend information is displaying correctly - a few sequencing / data pulling errors are causing a few inconsistencies, but we are very near to having them in working order.

In sum, we believe that the new F.A.S.T. Graphs will be better than ever. The new global database is incredibly robust and transparent. As such, we're excited not only about a fully functioning tool, but also in the vast array of enhancements that we will be able to eventually offer.

We appreciate your patience as we continue to work diligently to provide you with a better F.A.S.T. Graphs experience. ]]>

Your questions are good ones and all stem from the way in which the new version of F.A.S.T. Graphs currently presents data. Once the transition is in full force, we believe the answers to your questions will effectively answer themselves. However, in the meantime, we would like to provide you with some updates.

With our previous database we were given an earnings mnemonic called "operating earnings" which we believed provided a very good indication of the underlying earnings power of the company in which you were viewing. With the new database, S&P uses the name "Normalized Earnings" to describe this underlying earnings power. This metric is calculated as "Earnings Before Taxes excluding unusual items" multiplied by the tax rate. In order to keep the calculation standardized, S&P used a constant 37.5% tax rate for all companies. However, we found that this usually overstated a company's effective tax rate and consequently understated the earnings. Thus we have adjusted the normalized earnings reported to us to account for the company's actual effective tax rate. This will become the default option shortly, with the other options still available for viewing. We believe this metric will closely replicate the operating earnings mnemonic of the "old" F.A.S.T. Graphs.

Yes, we intend on adding a comprehensive glossary of terms.

We are working to update / enhance the calculator feature.

For the most part, historical dividend information is displaying correctly - a few sequencing / data pulling errors are causing a few inconsistencies, but we are very near to having them in working order.

In sum, we believe that the new F.A.S.T. Graphs will be better than ever. The new global database is incredibly robust and transparent. As such, we're excited not only about a fully functioning tool, but also in the vast array of enhancements that we will be able to eventually offer.

We appreciate your patience as we continue to work diligently to provide you with a better F.A.S.T. Graphs experience. ]]>

Obviously this is unknown and could in fact work out the other way. It's important to remember that this is a simply a calculator and only provides a baseline for one to begin his or her analysis. The higher P/E ratios might very well be justified and continue to persist into the future. ]]>

Obviously this is unknown and could in fact work out the other way. It's important to remember that this is a simply a calculator and only provides a baseline for one to begin his or her analysis. The higher P/E ratios might very well be justified and continue to persist into the future. ]]>