The formula is: PEG Ratio = (P/E Ratio) / Annual EPS Growth Rate. What if the PEG ratio is less than 1? A PEG ratio under 1.0 suggests undervaluation, making the stock a potentially attractive investment. Is a negative PEG ratio good? A negative PEG ratio indicates a mismatch, often due to declining earnings.
A negative P/E ratio suggests the company is currently unprofitable, as it has more expenses than revenue. It often means the company made no money over the last 12 months.
As a general rule of thumb, a stock with a PEG ratio of 1 is considered fairly valued. PEG ratios lower than 1 can indicate that a company's shares are undervalued, while ratios higher than 1 can indicate that they are overvalued.
What Is Considered to Be a Good PEG Ratio? In general, a good PEG ratio has a value lower than 1.0. PEG ratios greater than 1.0 are generally considered unfavorable, suggesting a stock is overvalued. Meanwhile, PEG ratios lower than 1.0 are considered better, indicating a stock is relatively undervalued.
PEG ratios higher than 1.0 are generally considered unfavorable, suggesting a stock is overvalued. Conversely, ratios lower than 1.0 are considered better, indicating a stock is undervalued.
Apple's peg ratio for fiscal years ending September 2020 to 2024 averaged -12.46. Apple's operated at median peg ratio of 0.49 from fiscal years ending September 2020 to 2024. Looking back at the last 5 years, Apple's peg ratio peaked in September 2020 at 2.86.
Amazon.com (AMZN) PEG Ratio: 0.33
The peg ratio for Amazon.com (AMZN) stock is 0.33 as of Friday, January 10 2025. It's worsened by 38.64% from its 12-month average of 0.24. The peg ratio is calculated by taking the p/e ratio and dividing it by the eps growth over the past 12 months.
Google (GOOG) PEG Ratio : 1.24 (As of Jan. 11, 2025)
Under What Circumstances Would a Company Have a Negative Price-to-Earnings (P/E) Ratio? An investor should become alarmed if a company consistently shows a negative P/E ratio for a long period—for example, five years in a row. If this is the case, then the company is not in good financial health.
This ratio is used to assess the current market price against the company's book value (total assets minus liabilities, divided by number of shares issued). To calculate it, divide the market price per share by the book value per share. A stock could be overvalued if the P/B ratio is higher than 1.
A beta coefficient of less than 1 means that a stock tends to be less volatile than the overall market. Utility and real estate stocks are two examples of industries that typically have low betas. A beta coefficient of more than 1 means that a stock tends to be more volatile than the overall market.
To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.
What is a Good Price to Book Value Ratio? Value investors often prefer values lower than 1.0, which suggests that an undervalued stock may have been found. The benchmark for certain value investors, however, may frequently be equities with a less strict P/B value of less than 3.0.
Walmart (WMT) PEG Ratio : 6.03 (As of Jan. 12, 2025)
As of today (2025-01-13), Tesla's share price is $394.74. Tesla's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Sep. 2024 was $3.65. Therefore, Tesla's PE Ratio (TTM) for today is 108.15.
The mean historical PE ratio of Costco Wholesale over the last ten years is 35.42. The current 54.17 P/E ratio is 53% higher than the historical average. Looking back at the last ten years, COST's PE ratio peaked in the Nov 2024 quarter at 56.47, with a price of $964.01 and an EPS of $17.07.
The trailing PE ratio is 25.59 and the forward PE ratio is 21.19. KO's PEG ratio is 3.77.
The PEG ratio offers deeper insights than a simple P/E ratio. A low PEG ratio suggests that a stock may be undervalued relative to its expected growth, while a higher PEG indicates potential overvaluation. As a general rule, a PEG ratio below 1.0 is considered attractive, suggesting that the stock might be a good buy.
Valuation Ratios
The trailing PE ratio is 24.79 and the forward PE ratio is 23.03. McDonald's's PEG ratio is 4.06.
A negative PEG (Price/Earnings to Growth) ratio suggests that a company's stock is undervalued relative to its earnings growth potential. PEG ratio combines a company's P/E ratio with its expected earnings growth rate.
Generally, a PEG below 1 means this metric considers a stock undervalued.