What does peg mean text

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The acronym PEG stands for Price-to-Earnings-Growth, and is a financial ratio used to measure a company’s current stock price relative to its expected earnings growth rate. It is used to determine whether a company’s stock is undervalued or overvalued.

The PEG ratio is calculated by dividing the price-to-earnings ratio (P/E) by the earnings growth rate. The P/E ratio is the current stock price divided by the company’s earnings per share (EPS). The earnings growth rate is the expected growth rate of the company’s earnings over the next one to three years.

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A PEG ratio of 1 is considered to be the benchmark, meaning that the stock is fairly valued. A ratio below 1 indicates that the stock is undervalued, while a ratio above 1 suggests that the stock is overvalued. Investors often look for stocks with PEG ratios below 1, as these stocks may offer more upside potential.

The PEG ratio is a useful tool for investors to determine whether a stock is undervalued or overvalued. It is important to remember that the PEG ratio is just one factor to consider when analyzing a stock. Other factors such as the company’s financial health, competitive position, and industry trends should also be taken into account.

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