Search results
Results from the WOW.Com Content Network
A PEG Ratio can also be a negative number if a stock's present income figure is negative (negative earnings), or if future earnings are expected to drop (negative growth). PEG ratios calculated from negative present earnings are viewed with skepticism as almost meaningless, other than as an indication of high investment risk. [6]
A PEG ratio is a tool used in fundamental stock analysis by investors to assess a share's value. It measures a stock’s price-to-earnings ratio against the anticipated earnings growth for the ...
Stock B is trading at a forward P/E of 30 and expected to grow at 25%. The PEG ratio for Stock A is 75% (15/20) and for Stock B is 120% (30/25). According to the PEG ratio, Stock A is a better purchase because it has a lower PEG ratio, or in other words, its future earnings growth can be purchased for a lower relative price than that of Stock B.
In the spirit of better investing and in celebration of the first Worldwide Invest Better Day coming up on Sept. 25, Motley Fool analysts will be answering user- and reader-submitted questions ...
Not all multiples are based on earnings or cash flow drivers. The price-to-book ratio (P/B) is a commonly used benchmark comparing market value to the accounting book value of the firm's assets. The price/sales ratio and EV/sales ratios measure value relative to sales. These multiples must be used with caution as both sales and book values are ...
For premium support please call: 800-290-4726 more ways to reach us
Usage of the P/E ratio has the disadvantage that it ignores future earnings growth. Because the future growth of the free cash flow and earnings of a company drive the fair value of the company, the PEG ratio is more meaningful than the P/E ratio. The PEG ratio incorporates the growth estimates for future earnings, e.g. of the EBIT. Its ...
Also, rough market comparison tools such as the PE ratio and the PEG ratio are used. More sophisticated forms of analysis ( fundamental analysis , quantitative analysis , and behavioral analysis ) use also some market criteria, such as the risk premium or beta coefficient .