Peter Lynch has invented Ratio up one called PEG, or Price to Earnings Growth Ratio that Lynch says that P / E alone could tell something was not quite as we compare the P / E to Growth Rate in Earnings per share. (EPS or earnings per share) of the company here. That means that Company A may have a P / E ratio at such a high P / E 20 times, which means that stocks may be too expensive and Lynch gave the rationale of PEG Ratio that company A can have P / E. high and continue to do that we have to invest if Company A has earnings per share (EPS Growth Rate) at the appropriate level. This means that even though the P / E, the individual is high, but if the P / E of A is less than or equal to the growth rate of earnings per share of Company A, by comparison, shares of A will remain attractive even if. P / E less than half of Growth rate of EPS and the stock, it is even more interesting is another
example Stock Company A has a P / E of 20 times and has estimated EPS growth rate over the next five years. At 20%, that means that the PEG is equal to one [2] This means that the market price of shares of Company A, reflecting the growth of earnings per share was reasonable and fit. If shares of company A, as it will mean that more than 1 PEG. A stock market was trading at a price that is higher compared to the growth of earnings per share (Overvalue) or rather to illustrate that. Overall market growth forecast of future profits expected to grow even more. People are willing to pay dearly. He believes that future earnings will be better than expected. And the share is growing faster than projection. Therefore, stocks with high PEG is often Growth Stocks shares of the stock with a PEG Ratio of less than 1 means that the stock is trading at a price lower than it should be (Undervalue) or at a price lower than the growth in EPS.
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