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

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.
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.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Percutaneous endoscopic gastrostomy catheter was removed in one patient.
Hypoalbuminemia is a poor predictor of survival after percutaneous endoscopic gastrostomy in elderly patients with dementia.
Risk factors and complications following percutaneous endoscopic gastrostomy: a case series of 1041 patients.
Indications, com- plications, and long - term results of percutaneous endoscopic gastrostomy: a retrospective study.
Percutaneous endoscopic gastrostomy: Clinical care of PEG tubes in older adults.
Details of the 64 complications that occurred in a total of 77.4 years of percutaneous endoscopic gastrostomy (PEG) feeding
Until the advent of the percutaneous endoscopic gastrostomy (PEG) tube in 1980, feeding was usually accomplished by a nasogastric feeding tube.
Laura Simons received the honour of being given the Sister Award for her work as a Percutaneous Endoscopic Gastrostomy (PEG) nurse.
Since the first reports, percutaneous endoscopic gastrostomy (PEG) is the preferred procedure for long-term enteral nutrition in children with persistent dysphagia (1).
(6.) Philip Minar, Jeffery Garland, Alfonso Martinez, and Steven Werlin.Safety of Percutaneous Endoscopic Gastrostomy in Medically Complicated Infants.

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