Valuation Metrics
PEG Ratio
Price/Earnings to Growth
Definition
P/E Ratio ÷ EPS Growth Rate = Growth-adjusted valuation
Explanation
The PEG ratio adjusts P/E for earnings growth. A high P/E might be justified if the company is growing fast. PEG below 1 suggests undervaluation relative to growth, above 1 suggests overvaluation. It helps compare stocks with different growth rates.
Example
P/E 30, EPS growth 30% → PEG = 1.0 (fairly valued)