Price/Earnings To Growth Ratio
Price/Earnings To Growth Ratio is a refined version of the P/E ratio was popularized by Peter Lynch, in his 1989 book One Up on Wall Street that “The P/E ratio of any company that’s fairly priced will equal its growth rate”.
The P/E ratio is the most popular way to compare the relative value of stocks based on earnings. This ratio tells whether a stock’s price is high or low relative to its earnings. By comparing a stock’s P/E ratio with its projected or estimated, earnings per share (EPS) growth, investors can know the overpricing or underpricing of a stock’s current valuation.
How to calculate Price/Earnings To Growth Ratio?
It is calculated as follows:
If the PEG ratio indicates a value of 1, this means that the market is correctly valuing a stock in accordance with the stock’s current estimated earnings per share growth.
If the PEG ratio is less than 1, this means that the stock’s price is being undervalued.
If the PEG ratio is higher than 1, this means that the stock is currently overvalued.
Table of Contents
1) Market Test Ratios: Introduction
2) Market Test Ratios: Earning per Share Ratio
3) Market Test Ratios: P/E Ratio
4) Market Test Ratios: Payout Ratio
5) Market Test Ratios: Dividend Yield Ratio
6) Market Test Ratios: Price/Cash flow Ratio
7) Market Test Ratios: Price to book value Ratio
8) Market Test Ratios: Price/Sales Ratio
9) Market Test Ratios: Price/Earnings To Growth Ratio