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stockAnalyst (version 1.0.1)

forwardPEG: Calculates PE-to-growth (PEG) ratio.

Description

A metric that appears to address the impact of earnings growth on PE is the PE-to-growth (PEG) ratio. PEG is calculated as the PE of the stock divided by the expected earnings growth rate (in percentage terms). The ratio, in effect, is a calculation of PE per percentage point of expected growth. Stocks with lower PEGs are more attractive than stocks with higher PEGs, all else being equal. Some consider that a PEG ratio less than 1 is an indicator of an attractive value level. PEG is useful but must be used with care ad PEG assumes a linear relationship between PE and growth. The model for PE in terms of the DDM shows that, in theory, the relationship is not linear (Jerald E. Pinto, 2020).

Usage

forwardPEG(leadingPE, percentEPSgrowth)

Value

Input values to two arguments leadingPE and percentEPSgrowth.

Arguments

leadingPE

number.

percentEPSgrowth

number.

Author

MaheshP Kumar, maheshparamjitkumar@gmail.com

Details

According to information provided by Jerald E. Pinto (2020), the method forwardPEG is developed for computing PE-to-growth (PEG) ratio for the values passed to its two arguments. Here, leadingPE is leading PE Multiple and percentEPSgrowth is five-year EPS growth forecast (in percentage terms).

References

Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194

Examples

Run this code
forwardPEG(leadingPE=43.97,percentEPSgrowth=25.30)

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