What is the PEG Ratio?
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The PEG Ratio measures a stock's valuation relative to its earnings growth rate. It is calculated as the P/E Ratio divided by the company's annual earnings growth rate. A PEG below 1 is generally considered attractive, while a PEG above 1 may indicate the stock is overvalued relative to its growth.
Think about a P/E adjusted for how fast earnings are growing. Divide P/E by the growth rate — below 1 is generally attractive.