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In the last article we looked at the Price:Earnings Growth ratio as a method which you could use to determine whether a quality blue chip share is cheap or expensive at its current market price. In this article we want to examine the extraordinary case of Curro Holdings which is currently sitting on a PE ratio of 108,77 which makes it one of the most expensive shares on the JSE and one of the most highly-rated.

Look at the chart:
<figure class="figure"><img class="figure-img img-fluid" src="/img/uploads/2016/04/Curro-Holdings.jpg" /></figure>
When thinking about this share you need to understand that it only plans to pay its first dividend in 2019 according to the CEO, Chris van der Merwe. If we consider its PE Growth ratio for the 5 years that it has been producing profits we get the following:
<table width="240">
<tbody>
<tr>
<td width="80"> </td>
<td width="80">Curro</td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">Year</td>
<td width="80">EPS</td>
<td width="80">EPS %</td>
</tr>
<tr>
<td width="80">2012</td>
<td width="80">7.1</td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2013</td>
<td width="80">12.87</td>
<td width="80">81.3</td>
</tr>
<tr>
<td width="80">2014</td>
<td width="80">17</td>
<td width="80">32.1</td>
</tr>
<tr>
<td width="80">2015</td>
<td width="80">27.8</td>
<td width="80">63.5</td>
</tr>
<tr>
<td width="80">2016</td>
<td width="80">44.7</td>
<td width="80">60.8</td>
</tr>
<tr>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">P:E</td>
<td width="80">108.77</td>
<td width="80">59.4</td>
</tr>
<tr>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td colspan="2" width="160">P:E Growth</td>
<td width="80">1.83</td>
</tr>
</tbody>
</table>
Its average growth in Earnings Per Share (EPS) has been a very impressive 59,4% per annum compound. Dividing this into its P:E ratio of 108,77 gives a P:E Growth ratio of 1,83  expensive, but not nearly as expensive as some other JSE shares (like Pick n Pay and Naspers). The point is that Curro has enormous blue sky potential. The need for educational facilities in South Africa has grown exponentially as government education has deteriorated. Curro has seen this gap and filled it with alacrity. The only share that we can compare it with is Advtech. That company is also on a high P:E of 29.26  but its track record of growing earnings is far less impressive. Consider the numbers:  
<table width="400">
<tbody>
<tr>
<td width="80"> </td>
<td width="80">Advtech</td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">Year</td>
<td width="80">EPS</td>
<td width="80">EPS %</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2003</td>
<td width="80">13.88</td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2004</td>
<td width="80">10.34</td>
<td width="80">-25.5</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2005</td>
<td width="80">15.98</td>
<td width="80">54.5</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2006</td>
<td width="80">22.66</td>
<td width="80">41.8</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2007</td>
<td width="80">32.05</td>
<td width="80">41.4</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2008</td>
<td width="80">40.22</td>
<td width="80">25.5</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2009</td>
<td width="80">40.11</td>
<td width="80">-0.3</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2010</td>
<td width="80">37.21</td>
<td width="80">-7.2</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2011</td>
<td width="80">39</td>
<td width="80">4.8</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2012</td>
<td width="80">34.4</td>
<td width="80">-11.8</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2013</td>
<td width="80">38.54</td>
<td width="80">12.0</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2014</td>
<td width="80">41.29</td>
<td width="80">7.1</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">2015</td>
<td width="80">50.2</td>
<td width="80">21.6</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80">P:E</td>
<td width="80">29.26</td>
<td width="80">13.7</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
<tr>
<td colspan="2" width="160">P:E Growth</td>
<td width="80">2.14</td>
<td width="80"> </td>
<td width="80"> </td>
</tr>
</tbody>
</table>
Now you can see that Advtech, although trading on a P:E which is less than one third of Curro's is actually far more expensive at its current price, because its track record of growing earnings is much less impressive, averaging of just 13,7% growth per annum. So that just goes to show that you need to look at the numbers! Both shares are expensive, when compared to other blue chips, but of the two, Curro is definitely the better buy.