What is the PEG ratio? How is the PEG ratio calculated? How is the PEG ratio useful for stock investing? Are higher or lower PEG values better for a stock - and why?


PEG is Price/Earnings to Growth. It is calculated as Price/Earnings/Annual EPS Growth. It represents how good a stock is to buy, factoring in growth of earnings, which P/E does not. Obviously when PEG is lower, a stock is more undervalued, which means that it is a better buy, and more likely to go up.

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PEG is Price to Earnings Growth. I've forgotten how it's calculated, I just remember that a PEG ratio of 1-2 is attractive by Graham & Dodd standards.

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