PEG growth-adjusted P/E

PEG divides a company's P/E by its expected earnings growth rate. It comes from a reasonable intuition: a high P/E is justified if earnings are growing fast, and a low one can be a trap if the business is shrinking. Its weakness is that the denominator is an estimate, so PEG inherits whatever optimism or error sits in the growth forecast.

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Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.