Investment Checklist Tip # 9 – The PEG Ratio

 

The PEG Ratio is a a great tool to quickly see where a stock may be valued at any point in time. 

 

It looks at a company’s current PE compared to its Earnings Growth Rate.  We want to invest in companies who have earnings that are growing at a higher rate that the current PE.  If so, you have potentially identified an undervalued company. 

 

The PEG Ratio is also useful because this takes growth into account whereas the PE Ratio does not.  It’s another tool to have in your toolbox.

 

 

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