Select Page
Serene Goh asked 2 years ago

Hi Victor/Rusmin
When using PEG ratio to valuate growth companies, do we need to calculate the average PEG too?
In the PEG lesson, you mentioned that eg. PEG <0.5x it is undervalued, 0.5x-1.0x it is fairvalue, 2.0x sell etc. Do we just rely on this information and look at the current PEG ratio to decide whether to buy/sell the stock?

Jieren Zheng replied 2 years ago

I would think PEG is a gauge. Growth rates is a very judgmental call. Too optimistic and you overpay and too pessimistic and you miss out.

1 Answers
Victor Chng answered 2 years ago

Hi Serene,
As what mentioned by Jieren, PEG is just a gauge. It should be one of those extra valuation method for you to confirm. 
There is no need to plot Average PEG ratio. It is always based on the latest figure. Your latest PE over your past three or five years CAGR.