Finance glossary
PEG Ratio
Definition
The P/E ratio divided by the earnings growth rate.
The PEG ratio refines the P/E by factoring in expected earnings growth, helping compare companies growing at different speeds. A PEG near 1 is often seen as fairly valued, below 1 as potentially cheap. It relies heavily on growth estimates, which can be unreliable.
In a sentence
A PEG ratio near 1 suggested the fast-growing stock was reasonably priced for its growth.
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