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Hunting for quality shares at a reasonable price

Earnings growth rates are important as well as historic financial strength
Hunting for quality shares at a reasonable price
  • Many quality shares remain expensive
  • Forward growth rates are important in weighing up what's worth paying up for. 

The quality shares approach has many firm advocates but the drawback in recent years has been the price investors have been asked to pay for these companies. Many of the top ranking shares on our quality screen this month are valued on long multiples of analysts’ estimates of their future earnings. 

IT consulting and solutions business Kainos Group (KNOS) is rated at 52 times its next twelve months’ forecast earnings. That looks pretty steep given the forecast growth rate for earnings for the current year is just 1.5 per cent; and for the following year it’s only 6.5 per cent. No surprise then that Kainos failed our price-to-earnings growth (PEG) test this month. 

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