Additionally, the estimates of the short-term implied growth rates have been shown to be inversely related to long-run IPO performance [Cogliati, et al.
Moreover, the robust predictors that caused long-run IPO performance include: (a) higher short-term implied growth rates, which lead to smaller post-IPO returns, (b) market momentum is positively associated with aftermarket performance, (c) IPOs that have lower book-to-market ratios perform better, (d) firms that have high sales volumes tend to have low levels of underperformance, and (e) low level of leverage posit that IPO firms less underperform.
Table 2 Implied Growth Rates and Forecast Errors Average StdDev Median Aggregate Skewness [g.sub.1] 38.0 56.7 16.6 1.28 [CAGR.sub.1] n.s.
Thus, again, our inference is that the implied growth rates
in part A of Table 2 are lower bounds.
At the current share price of the stock, we can say that the growth expectations of the market on PGOLD may be a little bit pessimistic because its implied growth rate of 15 percent falls below its minimum historical growth of 17 percent.
But if there is nothing wrong with the fundamentals as the low implied growth rate may have been caused mainly by poor market sentiment on share price, then the stock may be undervalued.
Currently, the median implied growth rate in the market is about 13 percent against historical growth rate of 9 percent.
While the market appears to be optimistic despite the bearish mood, the implied growth rate of 13 percent also shows the market is still far from bargain levels.
Current level of the stock market, despite having corrected by 4 percent recently, shows investors stay positive with higher implied growth rate
of 5.1 percent next year.
Olson, who tells investors not to directly apply these implied growth rates
due to errors in the model, views the search index as "directionally positive" form the company's domestic numbers.
This is explained by their much higher implied growth rates
(we talk more about the implied growth rates
of E&P companies on page 33).