PEG Ratio
Also called: price/earnings to growth
The P/E ratio divided by the earnings growth rate — it judges valuation relative to growth, so a fast grower's high P/E may still be cheap.
The PEG ratio, popularized by Peter Lynch, divides the P/E by the expected annual earnings growth rate. A PEG near 1.0 is often considered fairly valued; below 1.0 suggests the stock is cheap for its growth, above 1.0 expensive. It fixes the P/E's blind spot — that fast growers should command higher multiples.
PEG depends entirely on the growth estimate, which is uncertain, so it's a rough guide rather than a precise valuation. It's most useful for comparing growth stocks the raw P/E would make look overpriced.
On StockSetups
PEG is a screener field on StockSetups, letting you weigh a momentum name's valuation against its growth rather than on price-to-earnings alone.
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