Question 1

What is the PEG ratio?

Accepted Answer

PEG = P/E ratio divided by earnings growth rate. A PEG below 1 suggests a stock is undervalued. Above 2 suggests overvalued. It adjusts the P/E ratio for growth.

Question 2

What is the best metric for comparing stocks?

Accepted Answer

No single metric is best. Use a combination: P/E for valuation, PEG for growth-adjusted value, dividend yield for income, debt/equity for financial health, and growth rate for potential.

Question 3

What is a good P/E ratio?

Accepted Answer

The average S&P 500 P/E is about 20-25. Lower P/E (under 15) may indicate undervaluation or declining prospects. Higher P/E (over 30) may indicate overvaluation or high growth expectations.

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