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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


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 ?
Lairds claim their first point on travels SQUIRES G 2 CAMMELLL 2 LAIRDS were pegged back but will be happy with their first point of the season.
Elsewhere, Andre Gray hit a debut goal for Luton Town, but it wasn't enough for the Hatters as they were pegged back to a 1-1 draw at home to Grimsby Town.
"There is a clear understanding that the factors affecting inflation are external and will not be pegged back by putting rates up.
"Again though, we went ahead and got pegged back. Craig Harboard's hit a corner, and Josh scored with a good header at the front post.
Richie and Andy had got off to another flier, leading 11-4, but again were pegged back. Undeterred they saved match points before holding on to take it 23-21.
They were pegged back by Adam Voges, who picked up Joyce for 42 with his first ball and finished with three wickets for 25.
Nicky Gordon's strike looked to have given Bank the points but they were pegged back when Michael Fletcher netted from the spot..
Admission to the Vetch terracing for Saturday's game against Lincoln has been pegged back to pounds 5 and pounds 3 for concessions.
Alan Pardew's leaders twice led against Oldham Athletic through Jon Mackie (8) and Phil Parkinson (45), but were pegged back by Lee Duxbury (31) and Allan Smart (75).
But each time they were pegged back McManaman first and then Paul Ince before, with time running out, hero Vega became the villain when he allowed Michael Owen to brush past him and shoot against the post, leaving McManaman the simple task of tapping home the rebound.
The Barry Davies/Cliff Jones Memorial match takes place this Sunday and will be pegged back from the motorway back to the British Legion at Maghull.
The U's, who shocked table-topping Gillingham 1-0 in the week, went ahead in the 10th minute through Alfie Potter, but were pegged back when Doug Loft fired in a magnificent 25-yard drive.