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 ?
It is called the P/E to growth ratio, or simply PEG ratio.
Though most analysts calculate the PEG ratio by using forecasted earnings, Lynch prefers the conservative approach.
The PEG ratio is considered the premier metric for the investment style popularly known as growth at a reasonable price (GARP).
He says Lowe's is growing earnings around 15% a year, and shares have a P/E ratio of 15, generating a PEG ratio of 1.
The PEG ratio (which is the price-earnings [PE] ratio divided by the short-term earnings growth rate) has become a popular means of combining prices and forecasts of earnings and earnings growth into a ratio that is used as a basis for stock recommendations (implicitly for comparing expected rates of return).
One way to justify paying for high P/E is through the use of P/E to Growth ratio or simply known as PEG ratio.
Using the PEG ratio (growth of stock divided by earnings), the group uses a proprietary fundamental software tool to evaluate stocks, which means all members are required to have basic computer skills.