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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 ?
Mike Yandle, from Tredegar, was on the next peg and second with 31lb while two pegs away on the other side of the winner was another Pontypool competitor Paul Roberts who claimed third place with 25lb.
Steve Tyler (Image Stevenage) was stationed just four pegs away but he had carp of a much bigger stamp, netting fish to 8lb in his 110lb 10oz runner-up score.
Phil Weaver was four pegs away and used casters and maggots to finish runner up with 73lb 9oz while on the other side of the lake Ryan Morgan caught 66lb 14oz of carp for third place.
Drawn 10 pegs away from the once-prolific pipe bridge, Gibb had just one bream to remind him of the way things used to be, adding four razor- blade roach to take the verdict by an ounce.
Sirhowy AS member Jason Evans topped the weights with 54lb of carp from peg 9; Abertysswg angler Mark Williams was three pegs away and runner up with 42lb and Arran Williams, who was facing them on the opposite bank, finished third with 35lb 5oz.
Gary Townsend carried off the largest selection of Christmas goodies after his pole tactics put 9lb 15oz of roach and bream in his keepnet while next peg neighbour Mark Brush weighed in 9lb 12oz and Geoff Mortimer nine pegs away was third with just one ounce less.
He was on peg 24 and three pegs away Mark Barrell caught 16lb for second place while trailing well behind in third place with 8lb 14oz was Darrell Barnes.