PEG ratio
Also called: PEG, price/earnings to growth
The P/E ratio divided by the expected yearly growth rate of earnings, a rough attempt to adjust P/E for growth.
A P/E of 30 with expected growth of 30% gives a PEG of 1. The figure is very sensitive to the growth forecast and ignores how long growth lasts, the returns on capital needed, risk and interest rates, so a PEG below 1 does not prove a share is undervalued.
Learn more in these lessons
- The PEG ratioDoes a PEG ratio below 1 mean a share is undervalued?
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