PEG Ratio (Basics) | Investment Knowledge

Learn more about the PEG ratio (price/earnings to growth ratio) in this Investment Tutorial. I hope you can learn something new and if you like what you see feel free to comment, rate and subscribe to this channel. Thanks for watching. This video has been taken from http://www.youtube.com/user/MoneyWeekVideos and was approved for reuse on other channels. The PEG ratio (price/earnings to growth 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 growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. The PEG ratio is considered to be a convenient approximation. It was originally developed by Mario Farina who wrote about it in his 1969 Book, A Beginner's Guide To Successful Investing In The Stock Market. It was later popularized by Peter Lynch, who wrote in his 1989 book One Up on Wall Street that "The P/E ratio of any company that's fairly priced will equal its growth rate", i.e., a fairly valued company will have its PEG equal to 1. http://en.wikipedia.org/wiki/PEG_Ratio I created this video with the YouTube Video Editor (http://www.youtube.com/editor)

Comments

1. Brilliantly clarified! Thank you, sir.
2. Can you explain why the fair price is at PEG = 1, but not at PEG = 1.2 , 1.5 , 2.0 ,... or another number ? I haven't understood it for a long time.
   Thank you !
3. straight to the point...thank you!!
4. I'm surprised you only have 300 views, your putting out quality stuff! Thank you!!