Price to Earnings Growth

RECENT NEWS
Benzinga  Feb 4  Comment 
Below are the top small-cap auto dealerships stocks on the NYSE and the NASDAQ in terms of PEG ratio. Rush Enterprises, Inc. (NASDAQ: RUSHA) has a PEG ratio of 1.09. Rush Enterprises' trailing-twelve-month EPS is $1.72. Sonic Automotive Inc....
Mondo Visione  Feb 3  Comment 
ayondo is pleased to announce the hiring of Ms. Peg Reed as Senior Vice President of Business Development. Ms. Reed's expertise and successful track record in creating, building and managing profitable enterprises spans over several decades. Her...
Financial Times  Feb 3  Comment 
Central bank under pressure after Swiss decision to drop peg against the euro
Wall Street Journal  Feb 3  Comment 
Denmark’s central bank said on Tuesday that it sold Danish kroner in record amounts in January to weaken the currency and protect its peg against a falling euro.
Benzinga  Feb 3  Comment 
Below are the top small-cap biotechnology stocks on the NYSE and the NASDAQ in terms of PEG ratio. Calithera Biosciences, Inc. (NASDAQ: CALA) has a PEG ratio of 0.02. Calithera Biosciences' trailing-twelve-month EPS is $16.29. PDL BioPharma,...
Benzinga  Feb 2  Comment 
Below are the top business equipment stocks on the NYSE in terms of PEG ratio. Steelcase Inc. (NYSE: SCS) has a PEG ratio of 1.36. Steelcase's trailing-twelve-month EPS is $0.69. HNI Corp. (NYSE: HNI) has a PEG ratio of 1.62. HNI's...
The Economist  Jan 29  Comment 
THE year is only a few weeks old but already there has been turmoil in the foreign-exchange markets. On January 28th Singapore eased monetary policy, allowing its currency to fall to its lowest level against the dollar since 2010. The Swiss have...
Telecom Ramblings  Jan 27  Comment 
I'm at Metro Connect this week, so if you are there feel free to look me up!  In the meantime, here's a quick look at some news from this morning: The Midwest is getting some new regional 100G action this winter. COMLINK is putting Transmode's...




 

This article is about the financial metric Price/Earnings To Growth. For the article on the company with ticker PEG, see Public Service Enterprise Group (PEG).

The PEG ratio equals the P/E Ratio divided by projected annual earnings-per-share growth

The PEG ratio (alternately PE/G, P/E to G, Price/Earnings to Growth, or Price to Earnings to Growth) is a valuation metric comparing the Price to Earnings ratio of a company to its projected annual Earnings Per Share growth.

A PEG ratio below 1 would indicate a company is undervalued relative to its share price, while a PEG greater than 1 would indicate an overpriced stock, as a high P/E should generally correlate with a market expectation of greater forthcoming earnings.

However, as PEG relies on projected EPS growth, its usefulness is tied directly to the accuracy of such projections.

It must be noted that PEG is only a rule of thumb and has no underlying mathematical basis for gauging what a company's share price truly "should" be. The ratio has been criticized for penalizing value stocks, which have lower earnings growth.

Examples

  • Company XYZ is trading at $20/share with an EPS of $1.00 for a P/E of 20. Analysts predict a 50% annual earnings increase over the next five years. The PEG ratio of XYZ is therefore .40, indicating the stock is undervalued by the market assuming the earnings projection is accurate.
  • Company ABC is trading at $50/share with an EPS of $1.00 for a P/E of 50. Analysts predict a 50% annual earnings increase over the next five years. The PEG ratio of ABC is therefore 1.00, indicating the stock is valued properly by the market assuming the earnings projection is accurate.
  • Company LMN is trading at $10/share with an EPS of $1.00 for a P/E of 10. Analysts predict a 5% annual earnings increase over the next five years. The PEG ratio of LMN is therefore 2.00, indicating the stock is overvalued by the market assuming the earnings projection is accurate.
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