Q: Is there a formula or methodology that leans towards simple vs. Complex to determine the respective PEG ratio? Thank you
5i Research Answer:
The calculation is fairly simple, finding the components might be a bit more difficult. To calculate the PEG ratio it is a stocks P/E (preferably forward P/E) divided by the EPS growth rate expected in the next year. So if the P/E is 18 and the expected growth is 20%, it is 18/20 = 0.9. Similar to the P/E ratio, lower numbers are 'better'.