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PEG ratio
The P/E divided by the profit-growth rate. It judges whether a high P/E is justified by fast growth. Around 1 or below is reasonable.
Example
A P/E of 40 looks pricey, but if profit grows 40% a year the PEG is 1 — the price is earned.
Worth knowing
It stops meaning anything when growth is extreme or negative. A company recovering from a near-zero profit can show growth in the thousands of percent, which drives PEG towards zero and makes it look like the cheapest share on the market. A loss-making company has a negative P/E, so its PEG is not a small number — it is not a number. Treat PEG as useful only for a business whose profits grow steadily.