Home     About Us    Contact Us     Contribute     Privacy
Investing
Stocks
Bonds
Mutual Funds
Biz
Credit
Career
College
Economics
Tax
More
 
 
Marketplace
Related Articles
More
Related Discussions
Related Definitions
Related Categories
Tip of the Day

Tip of the Day Beware of Scams

Beware of Scams - You should always beware of scams, fraudulent practices, and these days, especially, there are plenty of them out there. Rule of thumb - if it...

read entire tip

Related Podcasts
Recently Added
Other Great Sites
 

PEG Ratios

Investing can sure seem confusing when you first get started. One reason is because there are so many different ratios out there to understand. But if you're simply trying to figure out if a stock is "cheap", I typically throw most of the other ratios to the side and use the PEG ratio.

The PEG ratio is the price-to-earnings-to-growth ratio. This ratio is a lot like the P/E ratio which divides the earnings from the price. But the PEG does more than just that; it also accounts for the growth rate. By taking the growth rate into consideration, it tells you if the company is overvalued or undervalued based on how fast it is growing.

If you've been investing for a little while now, you probably know what a P/E ratio is. The P/E ratio is not perfect because some companies are worth a high P/E and some aren't. For example, if ABD Corp had a PE ratio of 75, you might think it was overvalued. But if it was growing at 75% per year, it would be worth the price.

The PEG ratio is figured by taking the P/E ratio and dividing it by the earnings growth rate. For example, if XYZ corporation has a P/E ratio of 26 (about average) and a growth rate of 15% per year, its PEG ratio would be 1.73 (26/15). For all of you mathematicians out there, here is the equation to calculate the PEG:

Price / Annual earnings / Earnings Growth Rate

Once you've done the math and figured the PEG ratio, you now have to interpret it. Here's a small table of what the different numbers mean:

The PEG ratio isn't perfect. Even if a stock has a very low PEG, it doesn't mean that the stock will definitely go up. However, it is generally more likely that a stock with a low PEG is a good investment. I recommend using the PEG to compare a few different companies in the same sector...it usually helps you pick the most undervalued one.


Discuss It!

www.replicaorologi4it.com said:

This is a very good tips especially to those new to blogosphere, brief and accurate information… Thanks for sharing this one. A must read

replique montres said:

thankyou

Asic running shoes said:

You would be astonished to see the considerable amount of changes that has happened over the years in this field. It was much more than just a mock up and was said to be one among the best till date.

windows 10 pc said:

Even after my MBA studies in a well-reputed college, it was difficult for me to understand the concepts of stock exchange and stock marketing. However, this article about the stock exchange seems very helpful. It explains about the PEG ratio and investments.

rolex replica masterpiece said:

you probably know what a P/E ratio is.if the company is overvalued or undervalued based on how fast it is growing.

http://www.onesacluxefr.com said:

You have very nice site and will really helpful for everyone. And I will love to read your next post too. This blog as usual was educational thanks for share such good information

Safe Work Method Statement SA said:

I regularly visit this site to check out the events and functions and sometimes for resources. However, it has been a while that you have shared some news about latest or upcoming events.

Most Popular Articles
Most Popular Definitions
Related Questions
 
Daily Definition

Definition of the Day Fringe Benefits

Fringe Benefits? - These are benefits paid to employees beyond their wages. Such benefits are not required and therefore at the discretion of the employer. This can involve things like paid vacations or sick days. For executives of a given corporation these benefits may extend to any number of additional...

read entire definition

 
 

 

 

Home     About Us    Contact Us     Contribute     Sitemap

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Copyright © 2009 TeenAnalyst.com