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Pegging

1. The practice of fixing the exchange rate of a currency to the value of another currency. Most countries that peg their currencies do so to the U.S. dollar, though some peg to currency baskets. See also: Fixed exchange rate.

2. The act of buying a security in a large quantity to drive up the price. Writers of put options (and holders of short positions) practice pegging when the expiration date is approaching and it appears that the option will be exercised such that it puts the writer at a disadvantage. The idea behind pegging is to cause the price to rise so the option is not exercised and the writer can profit from the premium.

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

1. To fix the price of a new security issue during the issuance period through buying and selling it in the open market in order to ensure that the price in the secondary market will not fall below the offering price. Also called holding the market, price stabilization, stabilize. See also stabilization period.
2. To fix the rate at which foreign currencies exchange with one another.

Price/earnings-to-growth ratio (PEG).

To find a stock's PEG ratio, you divide the stock's price-to-earnings ratio (P/E) by its projected annual earnings per share (EPS) growth. The result is a rule-of-thumb assessment of whether the stock is overvalued or undervalued.

In brief, if a stock has a PEG ratio of 1, you conclude that investors are paying what the stock is worth based on its P/E and growth potential. If it is higher than 1 -- say 1.55 -- you conclude that investors are paying more than the growth projection justifies. If it is less than 1, you conclude that the stock may be poised to appreciate in value and so a wise purchase.

However, a PEG ratio, by itself, does not provide an adequate basis for an investment decision, any more than a P/E does, because it doesn't take company fundamentals into account. For example, an under-priced stock may be a good buy, but it may also be the sign of a company in poor financial shape or an industry in trouble.

The potentially greater problem is that growth projections, even when they are the consensus finds of professional analysts, are just estimates. That is especially true of estimates that look out five or more years, since there is no way to anticipate the shifting marketplace with real precision. Yet projections based on a single-year's results are notoriously inaccurate.

In short, a PEG ration can be a valuable addition to an investor's toolkit, provided you understand the assumptions on which its components and results are based.

References in periodicals archive ?
It can therefore be concluded that overall macrostructure and design of the peg itself plays a key role in pull-out force of cemented UHMPWE pegs.
The PEGs with higher molecular weights showed a stronger tendency toward crystallization and higher crystallinity.
Put your hook through the centre of the second peg up in the chain and loop this band forward.
At Saturday's commercial scene match on Mescar Lake, venue maestro Alex Bentley (Liverpool) swapped between the straight lead and pole with pellet on the hook to take 77lb of carp from peg 54 and first place.
Critics of the Hong Kong dollar peg blame it for causing a housing bubble and aggravating wealth inequality, inflation, and economic volatility.
Available as an option on new Meisel, Mozart and Mittenwald violins and violas, the new peg system has a suggested retail price of $75.
I thought of clothes pegs because so often I'd hang washing out, only to take it in five minutes later absolutely soaked from rain.
In cosmetics, PEGs act as coupling agents, solvents, humectants, lubricants, carriers, binders and bases in creams and lotions, deodorants and antiperspirants, dentifrices, hair dressing and makeup.
Our unique design overcomes the lawnmower problem because, with no metal springs involved, the blades just shred any of our pegs which drop on to the lawn.
Main outcome measures: complications of PEG, length of survival, duration of PEG feeding, recovery of swallow and modified Barthel index score.
The PEGs lay the foundation for our roadmap, and their work is critical to its success," said Jim Arnold, iNEMI's director of roadmapping and fellow of the technical staff for Motorola.