xilinx_altera

They're mathematical derivations of gordons growth model, according to fundamentals.

GGM: P0= D1/r-g

For PE, divide both sides by E:

P0/E1= (D1/E1)/r-g = 1-b/r-g
P0/E0= (D0(1+g)/E0)/r-g = (1-b)(1+g)/r-g

For PB, start with leading PE ratio. Remeber E1= ROE x B0

P0/E1 = 1-b/r-g
P0/ROExB0= 1-b/r-g
Therefore... P0/B0 = ROE(1-b)/r-g = ROE-g/r-g


For PS, remember D0= Sales x Profit Margin x payout ratio = S x (E0/S0) x (1-b). To get D1, multiply it by (1+g).

Therefore, just rearranging GGM:

P = D1/r-g = (S(E0/S0)(1-b)(1+g))/r-g

To get PS, divide both sides by S:

P0/S0 = (E0/S0)(1-b)(1+g)/r-g

Yay? This way, you also know what driver the various ratios. Hope that helps.