Bursa Malaysia Stock Watch
Why We Look at the PEG Ratio
kltrader
Publish date: Sun, 08 Aug 2010, 11:56 PM
kltrader
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This blog provides consolidated Bursa Malaysia stock market research, analysis, news and blogs from various sources. You can search and find all the past analysis and coverage on stocks and news by searching within this site. While this blog re-publishes contents from other sites, it does not own the rights nor responsible for the accuracy of the contents. If you disagree to your content from being published here, please add a comment, and your article will be removed from this site.
Why We Look at the PEG Ratio
One of the more popular ratios stock analysts look at is the P/E, or price to earnings, ratio. The drawback to a P/E ratio is that it does not account for growth. A low P/E may seem like a positive sign for the stock, but if the company is not growing, its stock's value is also not likely to rise. The PEG ratio solves this problem by including a growth factor into its calculation. PEG is calculated by dividing the stock's P/E ratio by its expected 12 month growth rate.
One of the more popular ratios stock analysts look at is the P/E, or price to earnings, ratio. The drawback to a P/E ratio is that it does not account for growth. A low P/E may seem like a positive sign for the stock, but if the company is not growing, its stock's value is also not likely to rise. The PEG ratio solves this problem by including a growth factor into its calculation. PEG is calculated by dividing the stock's P/E ratio by its expected 12 month growth rate.
For more information on utilizing the PEG ratio, visit Learning Markets.
How to Score the PEG Ratio
- Pass?Give the PEG Ratio a passing score if its value is less than 1.0.
- Fail?Give the PEG Ratio a failing score if its value is greater than 1.0.
Looking at the PEG ratio for WMT in above chart, WMT should receive a failing score. You can see that the PEG Ratio is above 1.0.
PEG Ratio: FAIL
Read more: http://www.nasdaq.com/reference/dozen/peg-ratio.aspx#ixzz0w08v7wfA
PEG Ratios
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