Full formBusiness & Corporate
PEGstands forPrice/Earnings to Growth ratio
Full Form of PEG
What is PEG?
The Price/Earnings to Growth (PEG) ratio is a refined financial metric that evaluates a stock's value by dividing its price-to-earnings (P/E) ratio by its projected earnings growth rate. Unlike the standalone P/E ratio, PEG accounts for growth, offering a more complete picture of whether a stock is overvalued or undervalued relative to its earnings trajectory. In the Indian context, the PEG ratio is widely used by analysts, fund managers, and retail investors on platforms like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to assess growth stocks, especially in sectors such as IT, pharma, and consumption. It is particularly valuable when comparing companies with varying growth rates within the same industry. For students preparing for commerce, finance, or MBA entrance exams like CAT, XAT, or CA Foundation, understanding PEG is essential as it frequently appears in financial analysis and valuation questions. A PEG less than 1 is generally considered attractive, while above 2 may indicate overvaluation. Indian investors often use PEG alongside other ratios like ROE and EPS to make informed decisions in volatile markets.
PEG का फुल फॉर्म
मूल्य-से-आय और वृद्धि अनुपात
Example
The mutual fund manager decided to screen Nifty 50 stocks using the PEG ratio to identify companies with strong growth at a reasonable price.
PEG — frequently asked questions
What is the full form of PEG?
The full form of PEG is Price/Earnings to Growth ratio, a valuation metric used in stock analysis.
How is PEG different from P/E ratio?
While the P/E ratio compares a stock's price to its earnings, the PEG ratio also includes the expected earnings growth rate, making it a more dynamic measure for growth stocks.
Why is PEG ratio important for Indian investors?
PEG helps Indian investors identify growth stocks that are fairly priced, especially in fast-growing sectors like IT and pharma, and is frequently used in valuation models for Nifty and Sensex stocks.