How it works
The PEG (Price/Earnings to Growth) ratio adds a growth dimension that a raw P/E can miss — famously popularized by investor Peter Lynch. As a rough guide: below 1.0 suggests undervaluation, 1-2 fair value, and above 2 potential overvaluation — though the right threshold varies by industry growth profile.
FAQ
Q. Should I always buy when PEG is low?
A. No — the growth estimate itself can be wrong, or reflect a one-time earnings bump. Cross-check with other metrics before acting.
Q. What growth figure should I use?
A. Typically the expected 3-5 year average annual EPS growth rate — analyst consensus estimates are a good source.