Price Earnings to Growth ratio determines the stock’s value while taking into account the future earnings growth rate. It is used to get better understanding of whether a company’s stock is overpriced, underpriced or just fairly priced. The PEG ratio uses the PE ratio of the company and compares it with the estimated annual growth rate of a company.
How to interpret PEG
A PEG ratio of 1 indicates that a stock is fairly priced and the current stock price has factored in the anticipated growth rate.
A PEG ratio of less than 1 indicates that a stock is undervalued and the stock price has potential to move higher in the future and vice-versa.
FormulaPEG = Price Earnings ratio/Annual EPS growth
PE ratio: 10 Annual EPS growth forecast: 10% PEG ratio will be 1.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
