Price-to-Earnings to Growth Ratio
PEG ratio is quiet popular among retail investors, however professionals do not use it often because of this ratio subjectivity. PEG ratio shows how expensive is stock compared to earnings and growth of earnings.
The lower PEG ratio is the better. It is good if PEG ratio is lower than 1, however, it mostly depends on trustworthiness of forecasts and market conditions. Also in emerging markets PEG is expected to be lower than in developed markets.
If you want to find cheap stocks that would be good investments, you have to calculate more valuation multiples, but you can’t rely on one ratio (P/E) when making investment decision.
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