For some companies, typically those that follow a steady growth path I tend to use an average historical PE when trying to judge how a share might be priced in the future. If I did that for PGW that figure would be 18.6.
Nevertheless this is an instance when simple averaging will get you into trouble. PGW has no historical record of being a growth company. Indeed in FY2012, widely regarded as a 'good' year for farming their earnings ($24.0m) are less than they were in FY2007 ($27.9m) before all those merger benefits had flowed through and before Craig Norgates failed growth path was trod.
If you look at the year when the PE was highest (FY2011) you will see that underlying earnings were at a near disastrous low point. This is probably a correct reflection by Mr Market. Surely things could not get worse than FY2011 and earnings did indeed rebound in FY2012.
If you look all through the earnings history you can see that the share price has not been as volatile as the earnings. This is again what I would expect as one good year does not imply that the following years earnings will be good. This is the reason why in FY2012, the share price ended at 'only' 35c. Because there can be no certainty or even likelihood that FY2013 would be any better.
Since that time some brokers are predicting a much better ayer and the share price has appreciated accordingly. However, at no stage has PGW itself forecast a good year in FY2013, nor released any profit hints to support that view. In fact quite the contrary. The information coming from George Gould of late indicates the year may be difficult. Given that the growth path is so uncertain I have a lot of difficulty paying for PGW a price that assumes a PE above 12.
SNOOPY