# Talk:PEG ratio

## Revision

My revision of this page needs someone to champion the "PRO" PEG argument. Any takers?

## The example

The statement "Stock price after 3 years (P/E=15=P/22) = \$330/share" assumes a PE of 15, but the long term PE can be different for other companies. I think this is a poor example. Shawnc 09:44, 9 January 2007 (UTC)

It is an historical fact that the average return is about 7.5%, and that the average PE is 15. This example is of a generic company that would abide by the norms. Of course the PE can be different for other companies, but this is because of investor's perception of how much they should pay for growth...exactly what I am trying to show here. For example, consider GE. For decades they earned a higher PE than normal, but eventually they too come to earth. You may argue that regardless of the long term average, the average today is not 15. But that is function of the negligible risk premium over inflation that all assets are demanding today. Something that will revert to the norm over time.Retail Investor 03:08, 10 January 2007 (UTC)

Why is this PEG ratio that is not based in math being spoken of? Why can't there be mention of one that is math-based such as (P/(12E(1+G)^2)) that actually makes sense. I didn't know where else to type this so excuse me if this is in the wrong location. P.S> long term average for PE ratio of the S&P500 is about 13, not including the recent bubble years that unduly influences it and for which enables the market to be inflated when reporters keep reinforcing a newer average PE ratio. Numbertruth (talk) 02:46, 2 December 2012 (UTC)

## What about Division By Zero?

What if the Annual EPS Growth is zero? (not unreasonable.) Then PEG is undefined. What's the meaning of that?

Worse, IMHO, is if Annual EPS Growth is a number very close to zero, then the PEG could be extremely large. Since calculating or estimating the Annual EPS Growth entails some uncertainty, any value of PEG calculated with a small Annual EPS Growth could have a huge range of values and thus could be wildly misleading.

That's the danger whenever calculating a ratio with a small denominator.

Another issue is what happens when a company starts to swing from losing month to start making money? That means the denominator and numerator could both be negative or have opposite signs! The transition from small losses to small profits might create very distorted value of PEG.

(I guess this counts as original research, so I won't add these issues to the article...)

Clemwang (talk) 23:09, 20 February 2014 (UTC)

## What does...

"A PEG Ratio cucky can also be a negative loe number" mean? — Preceding unsigned comment added by 80.45.182.9 (talk) 15:52, 25 August 2015 (UTC)

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