A dynamic financial ratio calculated as the quotient of the price-to-earnings ratio (P/E ratio) and the rate of growth of earnings per share. It is a ratio of ratios, as it compares the times the price of a stock exceeds the earnings per share in the numerator, and the denominator is the historical rate of growth of that earnings figure. Therefore, it is another possible indicator used to estimate whether a company is expensive or cheap and to compare between similar companies in the same sector. Typically, a high P/E ratio indicates high earnings growth, but this is not always the case; the P/E ratio reveals whether there is a direct relationship between the two data points or not.
« Back to Glossary IndexPrice-to-Earnings Growth (PEG) Ratio
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