PEG Ratio

PEG ratio, also known as Price/Earning to Growth ratio, is a valuation metric usually used to assess the trade-off between a stock’s earnings per share, price, and expected growth. Fundamentally, it adjusts the traditional P/E ratio by factoring in the company’s projected earnings growth. A lower PEG ratio usually specifies a more undervalued stock. When the PEG ratio of any stock is 1, it is considered neutral and refers to a fair valuation. However, it's necessary to note that the PEG ratio has its limitations, and the accuracy depends mostly on the accuracy of the earning and growth estimation. Undoubtedly, the PEG ratio is very helpful during stock screening, but make sure to consider it with other valuation metrics and fundamental analysis before making investment decisions. Before getting into more details, let's understand how to calculate the PEG ratio of any stock. To calculate the PEG ratio, we need to figure out the price-to-earnings ratio (P/E ratio). The P/E ratio is usually calculated by dividing the per-share value by its per-share earnings. Now, the PEG ratio formula is calculated by dividing the P/E ratio by EGR (Earning growth rate over five years). Now, the question is whether a lower or a higher PEG ratio is better for any stock. The answer is simple! A lower PEG is usually an indication of a buying opportunity. The stocks with less than 1 PEG ratio are considered as the stock price does not account for expected earning growth. If the PEG ratio is above 1 then it is not supposed to come under growth forecasts. Finding good PEG ratio stocks for your portfolio is a tedious task and requires huge effort. As we already discussed, finding such stocks needs to be considered several other key factors. But don’t worry; FindScan will do your job easily! This is an advanced screener that allows you to customize its platform with all the necessary parameters to find good stocks according to your needs. This is a user-friendly platform which can provide you with a screened stock list which can help you make the right decision before investing in any stock. For good PEG stocks, you can customize values such as P/E ratio, total market capitalization, and EGR according to your need on the FindScan screener to find the screened list. You can save the list and get notifications if there are any changes that meet your requirements in the future. On the screened list, you can also click on the stock name and read details about the company's performance which will help you to understand the company history and other crucial information about that stock. Overall, this is a great screener that helps both newbies as well as seasoned traders build their portfolios according to their investment goals.