PEG ratio

The P/E ratio divided by expected earnings growth.

Definition

PEG adjusts P/E for growth so fast growers can be compared with slower ones. Some investors treat a PEG near 1 as roughly fair, but there is no precise rule.

Formula

PEG = P/E / expected annual EPS growth rate (in %)

Watch out for

It depends on a growth forecast, which is uncertain.

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