Price to earnings growth (PEG) ratio

This key ratio compares the price to earnings ratio to a firm’s earnings growth rate to see whether a share is cheap or expensive.

Updated August 2019

A price/earnings-to-growth (PEG) ratio is used to try to spot shares that are undervalued relative to their growth prospects. Well-known investors Peter Lynch and Jim Slater both highlighted it in their writing as part of their stockpicking process. The ratio compares a company's price/earnings (p/e) ratio with the expected growth in its earnings per share (EPS).

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