Price earnings growth ratio

This ratio depicts the relationship between a company’s P/E ratio and its expected earnings growth. It therefore represents a share’s potential value. Similar to the P/E ratio, a lower PEG ratio implies a stock is more undervalued. This ratio varies across industries, and thus it is only useful to compare the PEG ratios of companies in the same sector.

PEG = (Price/earnings ratio) / annual earnings per share (EPS) growth