PEG ratio

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PEG Ratio

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

PEG ratio

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Lewis adds that he is also positive on AvalonBay's attractive PEG ratios, low leverage in its balance sheet, and a 2% discount in its valuation relative to net asset value against a 4% average premium in his apartment REIT coverage universe.
While PEG ratios are supposed to improve the use of P/E ratios by adjusting it with future growth, it fails to make any adjustments for risks as potential source of differences in valuation.
We view its 2012-13E PEG ratios, which are also lower than its EM peers, as generous.
Investment advisors who make individual investment decisions on publicly-traded securities rely upon a wide variety of models and fundamental valuation metrics such as earnings per share, price-to-earnings, price-to-sales, growth rates, return on invested capital, PEG ratios, market cap, enterprise value and EBITDA multiples.
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.
Arak and Foster (2003) develop some implications for the PEG ratio to explain the observed high PE and PEG ratios during the late 1990s.
Commenting on the Oryx Fund Standard & Poors said, "The investment approach is very methodical and structured, emphasising bottom-up selection of companies with low PEG ratios and good management."
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.
To take measurement of value a step further, investors must look at price to earnings to growth, known as PEG ratios.
To summarize, these correlations suggest that the bias in the estimate of the expected rate of return based on the PEG ratio will be higher for firms with higher PE, higher PEG ratios, lower book-to-price ratios, lower standard deviation of past returns, and higher market capitalization.
The share looks cheap priced at discounts to its EM peers on PEG ratios. Moreover, the company has provided a disclosure of its recent corporate actions, the lack of which may have been the reason for the 11.5% stockprice decline since midJune 2011.
The share price has declined 41% over the past three months and the stock now trades at massive discounts to EM peers on PEG ratios.