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PEG ratio

   Also found in: Financial, Wikipedia 0.02 sec.

PEG ratio

Method of relating the price of a share to growth. The ratio is calculated by dividing the price-earnings ratio (PE ratio) by expected earnings per share (EPS) growth. A value greater than one implies a stock is overvalued, and less than one implies one that is undervalued.

The ratio was invented by the English financial guru Jim Slater in the 1960s and is particularly useful for valuing small- and medium-sized growth stocks. The figures for the PE ratio and EPS used in calculating the PEG ratio are taken from consensus estimates.
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