# The Peter Lynch Line



## Steve64 (Jun 28, 2016)

Can anyone show me how to set up the "Peter Lynch Line" on a stock chart?
This is a simple P/E of 15 line that get laid on top of the chart. I understand it's a matter of taking the EPS and multiply it by 15 but I don't see an obvious way to do this on my Quest Trade charts.

Is there somewhere else I can go to plot this?

thanks in advance.


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## OptsyEagle (Nov 29, 2009)

I don't have an answer, with respect to setting up the charts, but I will add that it will end up just being a distraction on the chart. The first problem is whether you intend to use past earnings or forward projections. In my opinion, the past earnings are old news and should be baked into the price action of the stock by now. That price action not only has adjusted for the past earnings but every possible attempt to predict the forward earnings. That then becomes the next problem. Even if you do find forward earnings estimates, which is basically what really matters to the stock price, will they be correct and have they not already been priced into the share price.

So the trick to picking a stock and seeing it go up from where you buy it, is not to find out what others believe its merits to be, but more to find out what others believe its merits to be but figure out on your own how wrong they are, if they are at all.

For example you will find that most commodity companies stocks tend to fluctuate, quite wildly. You will also find, that many of the times, when the stock was nearing its top, its price earnings ratios was nearing its bottom. In other words, the companies were earning so much money, at the peak, that investors figured out that the party was almost over and started to sell. So a stock with a low price earnings ratios, which intuitively would tell you it is a bargain, would end up being nothing but a value trap, in those cases.

That is just an example of the problem you will experience if you focus too much on PE or PE becomes too important in your analysis. It is just one component, although an important one, in your research of the merits of a company. The rewards you will obtain or lose will depend on your ability to know something more then what the market knows. You will find that a difficult task, but we all have been where you are, so good luck.


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## Jimmy (May 19, 2017)

I know gurufocus.com has that feature in their charts but I think you have to have a membership - they do have a free trial though.


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