PEG ratio

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PEG Ratio

Price/Earnings-to-Growth Ratio

A ratio of a stock's valuation, that is, how expensive a stock is relative to its earnings and expected growth. It is calculated as:

PEG = Price/Earnings/Annual Earnings Growth per Share

A lower ratio indicates a less expensive stock with higher earnings and growth, while a higher ratio indicates the opposite. According to Peter Lynch, who popularized the ratio, a fairly priced stock has a ratio of 1.

PEG ratio

References in periodicals archive ?
PEG ratios are not the only buy sign, but they are important, says Monica Walker, co-manager of the Lou Holland Growth fund (LHGFX), which also follows a GARP strategy.
When looking at PEG ratios, investors should keep in mind that earnings growth estimates are just that--estimates.
We have a preference for companies with below average price/earnings ratios, below average price to cash flow ratios, below average PEG ratios (that's price/earnings to growth rate) for their sectors, but not necessarily deep value.
Notice that Red Robin (Nasdaq: RRGB-Free Report) and McDonald's (NYSE: MCD-Free Report) have the highest PEG ratios, while Jack in The Box (Nasdaq: JACK-Free Report) and Burger King (NYSE: BKW-Free Report) have the lowest PEG ratios.
So what are some deceptively attractive PEG ratios out there right now?
However, despite the stock rally in 2012, there are quite a few stocks that are trading with PEG ratios far, far lower than 1.
The perfect peg Stocks with PEG ratios of less than 1 are considered undervalued relative to their EPS growth rates, whereas those with ratios of more than 1 are considered overvalued.
The following 3 companies stood out because they had both stellar value fundamentals, including a low PEG ratio, and a solid business story, including strong earnings growth.
It is a compelling buying opportunity, when you can pay a PEG ratio of 1 or below for a good franchise company like First Union.
The PEG ratio takes the PE ratio one step further by factoring in earnings growth.
The PEG ratio is calculated by taking the price-to-earnings (P/E) ratio and dividing it by the growth rate.