Price/Earnings-to-Growth Ratio

The price/earnings-to-growth ratio (or PEG) is an expansion of the price/earnings ratio. It allows for investors to see how a stock is valued based on its per-share price, earnings per share, and the stock’s earnings growth rate. This is done by dividing the standard P/E ratio by the EPS growth rate.

A higher PEG ratio may imply that the company is undervalued relative to its historical growth rate. The ratio also lets investors compare a company’s P/E ratio with its earnings growth rate against its peers.

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Price/Earnings-to-Growth Ratio

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