Understanding the PEG Ratio: A Simple Guide for Indian Investors
Introduction Investing in the stock market can be tricky, but understanding key metrics like the PEG ratio can make it easier. The PEG ratio, or Price/Earnings-to-Growth ratio, helps investors determine if a stock is fairly valued by considering its earnings growth. This guide will explain the PEG ratio in simple terms and show you how to use it effectively. What is the PEG Ratio? The PEG ratio is a tool that combines the P/E (Price-to-Earnings) ratio with the company's expected earnings growth rate. It provides a more complete picture of a stock's value. How to Calculate the PEG Ratio The formula for the PEG ratio is: P/E Ratio: This is the price per share divided by the earnings per share (EPS). Earnings Growth Rate: This is the expected annual growth rate of the company's earnings. Why the PEG Ratio is Important The PEG ratio is important because it adds the growth factor to the P/E ratio. A high P/E ratio might make a stock look expensive, but if the company is growing ...