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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 ?
Initial symptoms of phytotoxic effects in grafted citrus plants irrigated with polyethylene glycol (PEG) solution (A and B); advanced phytotoxic symptoms in grafted citrus plants irrigated with PEG solution at -376 kPa (C and D); healthy aspect of new shoot flush after restoring regular water irrigation without PEG solution (E).
Liatsos et al., "Comparison of two schemes of small bowel preparation for capsule endoscopy with polyethylene glycol: a prospective, randomized single-blind study," European Journal of Gastroenterology & Hepatology, vol.
Akhter, "High-molecular-weight polyethylene glycol inhibits myocardial ischemia-reperfusion injury in vivo," The Journal of Thoracic and Cardiovascular Surgery, vol.
The concentration of 0.04% cinnamon EO, the higher acceptable concentration for sensory analysis in yogurt, alone or associated with EDTA and/or polyethylene glycol, failed to show antimicrobial activity against aerobic mesophiles and yeasts and molds.
0.02 g sample was dissolved by polyethylene glycol and transfered into a 100 mL volumetric flask and diluted with polyethylene glycol to 100 mL.
The grain size was reducing from 104 nm to 83 nm, after adding polyethylene glycol. The thickness of thin film increased with the addition of polyethylene glycol.
However, when green tea extract was given with polyethylene glycol, there was a significant reduction in body weight gain, insulin resistance and glucose intolerance in both normal mice on a high fat diet and diabetic mice.
Gagnon, Improved antibody aggregate removal by hydroxyapatite chromatography in the presence of polyethylene glycol, J.
An alternative approach is to induce water stress through polyethylene glycol (PEG) solutions for screening of the germplasm (Nepo-muceno et al.
The bowel cleansing with the new 2 liter solution of polyethylene glycol (PEG) plus ascorbic acid was deemed as effective as the standard 4 liter PEG plus electrolytes solution, and is more acceptable to patients.
Polyethylene glycol 3350 plus electrolytes appears to be safe and well tolerated for treating chronic constipation in children, results from a randomized, double-blind, placebo-controlled trial showed.

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