The PEG ratio is just one of the many flawed tools you might use to arrive at a true investment thesis. No matter how you bake the PEG ratio, you end up depending on a large set of uncertain numbers.

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PEG ratio isn’t the mysterious focal point of the 70s American rock band Steely Dan (“Peg,” the 1977 hit from Steely Dan), but what it is, how it works and when you use it is a mystery to ...

Since P/E ratios are typically around 15 to 20, and growth rates are often in the 10% to 15% range, the PEG ratio is often numerically around 1 or 2 (note that the S&P 500 has a PEG ratio of 1.64 ...

In the equity market, investments need to be prudently hedged to overcome uncertainties and limit losses related to external shocks. A question that arises often is whether one should resort to a ...

The PEG ratio is a useful shorthand for stock valuation. You get it by dividing a stock's current price-to-earnings ratio by its earnings growth.

In the 20x case, the PEG ratio is 4.0x (= 20x P/E ÷ 5% Growth); whereas in the 30x case, the PEG ratio is 9.01x. So we have fair value with a PEG ratio of 4.0x and also at 9.01x.

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The PEG ratio doesn't account for the time value of money. That is, when you invest $105.60 in Facebook in exchange for just $1 of earnings, that $1 has to grow rapidly for you to break even.

Also, the PEG ratio doesn't take into account other variables that could add or take away from a company's value. For example, some growth companies keep lots of cash on their balance sheet, but ...

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Caveats The PEG ratio is limited by its focus on earnings growth. For example, Ann Taylor Stores (NYSE:ANN) grew earnings at -0.32% over the past three years, but the stock tripled.