it is to be determined that firm is undervalued or overvalued on P/E-to growth basis, assuming that the risks are similar in both the industries. Introduction: PEG (Price/earnings to growth) ratio is a stock valuation. The value of the ratio represents the accurate correlation between company’s market value and the projected earning growth. The PEG ratio is calculated by the ratio of the price/earnings to growth. It can be given as − P E G r a t i o = P r i c e T o E a r n i n g R a t i o G r o w t h R a t e

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Chapter 18, Problem 11CP

Summary Introduction

To calculate: it is to be determined that firm is undervalued or overvalued on P/E-to growth basis, assuming that the risks are similar in both the industries.

Introduction: PEG (Price/earnings to growth) ratio is a stock valuation. The value of the ratio represents the accurate correlation between company’s market value and the projected earning growth.

The PEG ratio is calculated by the ratio of the price/earnings to growth. It can be given as −

PEGratio= PriceToEarningRatioGrowthRate

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