PEG Ratio vs. the P/E Ratio

Kevin Matras compares the PEG ratio to the P/E ratio and shows how to use them both for finding classically undervalued stocks with market beating growth rates. Highlighted stocks include CSIQ, MEOH, RCL, SBRA and TRN.

[@Discovery_and_Change]

0:47 P/E = price-to-earnings (price divided by earnings)
1:06 In general, a lower P/E ratio is considered to be better
1:18 A P/E ratio of 20 or lower is what a typical value investor seeks
1:23 In 2014, at the time of this video, the S&P 500's P/E ratio was 15.33
1:33 PEG = P/E divided by growth-rate
1:40 1.0 or less is a good/undervalued PEG
1:47 1.0 or above means overvalued PEG
2:08 PEG for S&P 500 (at time of video) is 1.93

[@AndrewPalmerJazz]

Remember that if you're looking at forward P/E, you're already accounting for next year's earnings. By using the 1-year PEG screen you're just asking for the group of companies that has the biggest hill to climb to get to the P/E you want. In other words, earnings might have to grow 20%+ just to get to a 20 P/E. Perversely, by using these metrics together, you're turning up speculative stocks instead of cheap stocks. That stock fails to be cheap if the 20% growth doesn't materialize! I'd be very, very wary of the company with a 300% growth rate.

[@RealityExposedChannel]

Distracting tools in the background 👎

[@Brsrafal]

i'm new studying this stuff u explain it the best

[@rupaladhikary6280]

and now in 2019 all the companies you mentioned are down by more than 30%

[@reyultra9247]

check again in 2021

[@rizalukman7982]

Pe growth ratio is more accurate indicator of stock compare with pe ratio.

[@kevin5vish]

what if peg ratio is negative ,but findamentally a strong stock ?

[@ZenoxDemin]

4 years later, from those 5, only RCL did good. Hindsight is 20/20 but still....

[@killahnan]

Evaluate the statement you said carefully, really...there in lies the secret to the stock market, its very simple but we make it oh so complicated

[@kevin5vish]

Kevin matras, the best.

[@beesalbantawa3119]

Great

[@rajalimbo1463]

Nice

[@davidalen9279]

good explanation. thank you.

[@ZacksInvestmentNews]

Thanks for watching!