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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 ?
Dave Anderson led the way on peg three with 13-11-13.
To fabricate the PEG/AB composites, the PEGs with various average molecular weights were first melt at 50-70[degrees]C, and then the AB was slowly added under stirring and vacuum.
(1-3) There are two typical designs of glenoid components, namely keel or peg. Keel designs, as compared to peg designs, require more bone resection and also more cement and have been associated with increased rotation and translation, (4) as well as increased radiolucent lines.
The PEGs with higher molecular weights showed a stronger tendency toward crystallization and higher crystallinity.
For technical reason, large uplift [w.sub.max] of densely located pegs relatively to the spacing [t.sub.k] has been applied.
The topper band should now be evenly stretched around the central peg.
Rob Emery from peg 105 just above the road bridge and C Stockton from peg 103 at Bowesfield tied for fifth place with 2lb 3oz.
Derek Bennett (Preston/Saints) again showed his skills on the tip with a second-placed 13.13.0 from peg 155 on the dam wall.
Between now and then, the peg is still Hong Kong's best option for maintaining systemic stability.
Distinguishable by its slightly damaged tail, the 12lb monster fell to Kevin Millard's bomb and pellet approach on peg 31.
The lower inflation was not however driven by the difference in currency pegs.
Nations in the Central African Economic and Monetary Community (Cemac), Brunei and Ecuador all have fixed pegs.