2007-09-27 00:57:46 · 4 answers · asked by itsjunglepat 6 in Business & Finance ➔ Investing
A lower ratio is "better" (cheaper) and a higher ratio is "worse" (expensive). A PEG ratio that gets close to 2 or higher is generally believed to be expensive, that is, the price paid appears to be too high relative to the estimated future growth in earnings.
It is generally accepted that a PEG ratio of 1 represents a reasonable trade-off between cost (as expressed by the P/E ratio) and growth: the stock is reasonably valued given the expected growth. If a company is growing at 30% a year, for example, then the stock's P/E could be as high as approximately 30. PEG ratios between 1 and 2 are therefore considered to be in the range of normal values.
2007-09-27 01:55:38 · answer #1 · answered by Philip Augustus 3 · 1⤊ 0⤋
This is a difficult question to answer precisely because PEG ratios are the result of projected questimated earnings which are notoriously inaccurate. If the PEG ratios were correct, then the lower ratios would definitely provide a greater potential return. But they must be taken with several pounds of salt. If the PEG is under 1.5, then the stock might have something to recommend it. If it is above 1.5, the question then becomes why? Does the stock pay a very high dividend for example? Or is the company a very large cap stable company such as PG for example?
If the company has a really low PEG ratio, that is an indication that investors are very dubious that the company will actually perform to analysts' projections. Frankly I am dubious of all analysts' projections.
2007-09-27 04:15:40 · answer #2 · answered by Anonymous · 1⤊ 0⤋
This Site Might Help You.
RE:
What do you consider a reasonable to good PEG Ratio (5 yr expected) in a stock?
2015-08-10 06:26:47 · answer #3 · answered by Anonymous · 0⤊ 0⤋
below 1.00
2007-09-27 01:18:38 · answer #4 · answered by bizzbagg 4 · 1⤊ 0⤋