Guide to Price Earnings Growth Yield Ratios
Price Earnings Growth Yield (PEGY) ratio's have served me very well in the financial markets over the years and I've been using them for successful trading on Football Index since joining in February 2020.
Simply put, PEGY enables you to marry up earnings growth rates, price, dividends and yields to spot value-priced players on Football Index. There is a full description here in relation to financial markets. Football Markets are trickier as there are no real projected earnings as there are in the financial markets, so it's an amended version and a ‘trailing' or ‘historical' PEGY. However, I feel it's easily one of the best methods for assessing whether a player is value or not.
Most PEGY's are annualised in the financial markets, but due to summer breaks, Covid disruptions and changes to the underlying Divs themselves, we have to look at it in shorter time periods. What I have done is break down football into 4 distinct time periods as noted below -:
Phase 1 – 9/8/2019 – 25/11/2019 (108 days)
Phase 2 – 26/11/2019 – 13/3/2020 (108 days) (Covid)
Phase 3 – 16/5/2020 – 23/08/2020 (99 days) (Post Covid – End of Season)
Phase 4 – 24/8/2020 – Current Phase (Will reach 99 days on 1/12/2020)
Now, it's worth pointing out that sometimes a player will have earned 0 Divs in Phase 1, which makes it difficult to calculate a long-term PEGY, Bruno Fernandes a case in point here. So, I've balanced that out by looking at those players who have earned Short-Term PEGY figures, between Phase 3 and Phase 4. This can help capture players that are producing the goods, before they actually start to be noticed by the masses. A longer term PEGY (between Phase 1 and Phase 4) gives long-term confidence in that player. For me, ideally I want to see a combination.
We also have to look at other factors here. The older a player, generally, the less opportunities they have to win ‘career divs' – although the argument for using career or 3-year Div's is pretty flawed, as there are too many imponderables. For example, players hit peak at different ages in different positions, player form can start to tail off as they get older (apart from freaks like Ronaldo, Messi and Lewandowski) and there is always the chance of a transfer to a non-PB league, retirement, or the club they are playing for can suffer a dip in form. That is why it's best to focus on whether that player is value RIGHT NOW, and having an exit or dividend re-investment strategy.
My favoured approach has been to reinvest dividends back into the same player, but I'm of the belief that it's better to build up a cash balance and re-assess at the end of each month and then either a) take money out of FI completely and diversify or b) reinvest for recycling of IPD's on those who represent the best value. You also have to consider the ADDED VALUE of having a player compete regularly for TOTM Dividends, especially those in European competition with the 1.25 PB multiplier, which is generally where my focus lies. You also have to consider MB dividends, especially on EPL players, where there is a bias, and also within teams within the EPL, especially Man Utd or high profile teams, again involved in Europe, or even domestic competitions like the FA Cup.
I hope that helps – on the tabs you can find Short-Term and Long-Term tables for IPD's, PB and MB. You can also sort these columns and the stats are updated automatically on the website every day or so. Any questions , or suggestions for additional details, please drop me a message on Twitter @fbitrader