Thursday, January 18, 2007

Perpetual news can not sway analysts

Perpetual Limited (ASX:PPT) announced its funds under management have exceeded its expectations for the first half of 2006-07 to reach $36.8 billion. The funds increased dramtically due to a 12.1 per cent gain on the All Ordinaries Index. However analysts are saying that Perpetual's growth rate is slowing as more funds flow to cash and credit funds with lower margins. Their expectations are based on the growth of perpetual being heavily dependent on investment markets. At this time Perpetual is trading on a multiple of 22 times 2007 earnings which is extremely high and I would suggest is overvalued.

Its interesting how many people just invest in managed funds and super funds without researching where they are putting their money. They expect that the "experts" are going to do everything for them and in boom times they are happy. But think back a few years ago when funds were returning -20%. I suspect perpetuals funds will continue to increase as a lot of their customers are on regular investment plans and superannuation will continue to be put into the funds for many years to come.

The stock is trading a good dividend yeild but the PE ratio and PEG ratio figures make me vary that this stock is overpriced. I would not be entering a position in this company until its priced dropped far lower.

Good Luck investing.

No comments: