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10 stocks tell you why U.S. stocks plunged!



On February 24, 2020, the U.S. stock market plummeted by 1,000 points. Since the outbreak of the new coronavirus epidemic, although market funds have already begun to flow into safe-haven assets such as gold and bond markets, the epidemic does not seem to have an impact on the stock market trend. 

As the new coronavirus epidemic spread further, and companies began to publish performance reports, investors began to worry that the epidemic would affect the company's next quarter's profit growth and made predictions for the company's next quarter's performance. 

Analysts lowered the companies The profit forecast for the next quarter, and the Fed is expected to cut interest rates in March, the Fed's rate cut indicates that the economy may further decline.

S & P 500 Index
Fed watch


As an investor, you need to know how to value a company using PEG indicators. Generally speaking, the valuation using the PEG indicator is more accurate, but it is only used to analyze the latest quarterly data, because the company's profit growth is always changing, and the long-term valuation of the company may not be applicable. The so-called PEG indicator is the company's price-earnings ratio (PE) divided by the company's annual growth rate of earnings per share (G). 

(PE) simply reflects the current value of a stock, and PEG links the current value of the stock to the earnings growth of the stock. For example, the current price-earnings ratio of a stock is 20 times, and the performance report shows that the annual growth rate of EPS is 20%, then the PEG of this stock is 1. When PEG equals 1, it indicates that the valuation given to this stock by the market can fully reflect the growth of its performance.

PEG = PE / G x100

If the PEG is greater than 1, the value of the stock may be overvalued, or the market believes that the company's performance growth is lower than market expectations. When the PEG is less than 1, the value of the stock may be undervalued, or the market believes that the company's performance growth is higher than the market's expectations. 

Usually, the company's profit is in the growth stage, and the PEG index will be lower than 1. Investors need to note that like other financial indicators, PEG cannot be used alone, and must be combined with other indicators. The most important thing here is the expectations of the company's performance.

Then, by analyzing the company's profit forecast for the next quarter, we analyze the PEG index of the ten weighted stocks of the S & P 500 index.

Microsoft  PEG=0.96


Apple  PEG=1.38


Amazon  PEG=2.421


Google  PEG=2.24


JPMorgan  PEG=0.77


Johnson & Johnson  PEG=4.28


Visa  PEG=2.48


Procter & Gamble PEG=9.52


Mastercard  PEG=2.16


Facebook  PEG=1.63

The analysis of the PEG index of the top ten heavyweights of the S & P 500 shows that the value of most companies' stocks is overvalued, so the decline in company stock prices is reasonable, and the value of the US stock market may also be overvalued, causing the US stock market to fall.
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