PEG is a newer investment ratio measure of a security’s PE ratio divided by the firm’s growth rate as a percentage. It is examined and contrasted with other investment valuation measures. PEG is shown to be problematic in terms of its units of measure, in what it purports to appropriately determine, and it is non monotonic for relatively profitable firms and is only slightly indicative of correct security selection for relatively unprofitable firms.
Copyright © Charles J, Higgins, Ph.D. All Rights Reserved. Published by American Research Institute for Policy Development.
Higgins, Charles J. "What’s Wrong with PEG?" Journal of Finance and Bank Management, Vol. 3, No. 2, 2015, 1-6.