Investment Valuation in India

PEG ratio The PEG ratio is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected future growth. PEG = (P/E Ratio) / (Growth Rate) A lower ratio is "better" (cheaper) and a higher ratio is "worse" (expensive) . A PEG ratio that gets close to 2 or higher is generally believed to be expensive, that is, the price paid appears to be too high relative to the estimated future growth in earnings. It is generally accepted that a PEG ratio of 1 represents a reasonable trade-off between cost (as expressed by the P/E ratio) and growth: the stock is reasonable valued given the expected growth. If a company is growing at 30% a year, for example, then the stock's P/E could be as high as approximately 30. PEG ratios between 1 and 2 are therefore considered to be in the range of normal values. The PEG ratio is commonly used and provided by various sources of financial and sto...