P/E ratio divided by earnings growth rate — adjusts P/E for growth.
PEG below 1.0 traditionally suggests undervaluation; above 1.5 suggests rich valuation. The metric, popularized by Peter Lynch, addresses the limitation that high-growth companies "deserve" higher P/E ratios. Caveat: PEG is highly sensitive to growth-rate assumptions, which often prove optimistic.
P/E ratio divided by earnings growth rate — adjusts P/E for growth. PEG below 1.0 traditionally suggests undervaluation; above 1.5 suggests rich valuation. The metric, popularized by Peter Lynch, addresses the limitation that high-growth companies "deserve" higher P/E ratios. Caveat: PEG is highly sensitive to growth-rate assumptions, which often prove optimistic.
In valuation, PEG Ratio is one of the building blocks investors use to compare opportunities and assess risk. Understanding it helps you read research notes, earnings reports, and market commentary without getting lost in jargon.
PEG below 1.0 traditionally suggests undervaluation; above 1.5 suggests rich valuation. The metric, popularized by Peter Lynch, addresses the limitation that high-growth companies "deserve" higher P/E ratios.
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