The PEG ratio is a company’s price to earnings (P/E) ratio divided by the growth rate of its earnings over a specific future time period. Value and growth investors are more concerned about the future instead of the present.

The PEG ratio is calculated by taking the P/E and dividing it by the projected growth in earnings.

PEG = P/E / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next year of 20% would have a PEG of 1.5 (30 / 20 = 1.5).

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