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What is the Price/Earnings to Growth Ratio (PEG Ratio)?

The Price/Earnings to Growth Ratio (PEG Ratio) is used to determine a company’s value relative to its expected growth.

The PEG ratio can be calculated by dividing a company’s P/E by its annual earnings per share growth. A lower PEG ratio may indicate that a company is undervalued relative to its expected growth, and a general rule of thumb is that a PEG ratio below 1 is favorable.

Keywords: valuation, P/E ratio, PEG ratio, P/E, ratios,