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What is PEG ratio?

The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period.

Is a PEG ratio overvalued?

A PEG ratio above 1.0 suggests a stock is overvalued. In other words, investors who rely on the PEG ratio look for stocks that have a P/E ratio equal to or less than the company’s expected growth rate. Of course, investors shouldn’t rely exclusively on the PEG ratio or any other single financial metric.

Is a low PEG ratio a good investment?

The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate. A low PEG ratio is always better for value investors. While P/E alone fails to identify a true value stock, PEG helps find the intrinsic value of a stock. There are some drawbacks to using the PEG ratio.

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