What Is The PEG Ratio In Relation To Stocks - Price Earnings Growth

So what is the PEG ratio in relation to stocks?

PEG stands for (price earnings growth), and is simply another way to evaluate the fundamentals of a company. Unlike a typical price-to-earnings ratio, a PEG takes into account a company's future annual earnings growth rate.

The chart below gives basic guidelines for the PEG. As always remember this is just a basic guideline. There are no guarantees that a low PEG will result in a positive stock pick. This is mainly because you are using earnings estimates; which basically means a best guess on the future earnings of the company which are not always very reliable.

As an example:

If a company has a P/E ratio of 20 and an annual earnings growth rate of 10 percent then the PEG would be 2.

PEG Ratio Guidelines

Less than 0.50
Undervalued

Between 0.50 and 1 Fair Value

Greater than 1 Overvalued

Free Investing Tools: Free Stock Analysis | Free Investing TV | 10 Free Trading Lessons

Return from PEG Ratio to Investing Resources

Emergency Funds:

Before you ever invest in stocks or other risky investments you should have an emergency fund in place. A great place to keep an emergency fund is ING DIRECT.

Best Online Broker:

The best online stock broker when it comes to cost and service is without a doubt Zecco.com.

Pick Quality Stocks:

If you are looking for the best technical analysis stock picking software then check out MarketClub.

Budget Money:

We have designed an easy to use spreadsheet that allows you to track your daily, monthly, and yearly income and expenses quickly and easily: Budget Spreadsheet