PE (GR5) and PEG (GR5) - Valuation Indicators – Stock Doctor Help

PE stands for Price Earnings.
PEG stands for Price Earnings Growth.

Indicator Type

Valuation Indicators

Formula

PE = Market Value per share / Earnings per share.

PEG = PE / EPS Growth
where:
EPS = Earnings per share

Parameters

PE and PEG: You can choose a colour for the plot, by selecting the box next to it to bring up a colour palette.

Panel: You can also choose where the study is placed, by default it is set to Auto applying it to it own panel at the bottom of the chart but if you would like to overlay the study onto another panel, click the drop-down arrow next to Auto and select a panel e.g. Panel 1.

Once you have finished adjusting parameters, click Done

Theory

Price earnings (PE) and price earnings growth (PEG) ratios can be used to assess share price value. A PE ratio of less than the industry average can indicate the potential for share price appreciation. The PEG ratio is comparing the PE ratio to the EPS Growth over the last 12 months. This indicates whether the premium paid on the company’s share price is justified, given the current rate of earnings growth.

- If the EPS growth rate is greater than the company’s PE, the PEG ratio will be less than 1.0, suggesting that the company’s share price may be undervalued at the current price.
- If the EPS growth rate is less than the company’s PE, the PEG will be greater than 1.0, indicating that the company’s share price is potentially overvalued at the current price.

Please note: PEG is not plotted on a chart, where:
- EPS growth cannot be calculated because a company’s previous year’s EPS is negative, or
- EPS growth is negative (i.e. previous years EPS is greater than the current years EPS).

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Formula

Theory