Price-to-earnings ratio relative to earnings growth rate
factor.formula
Price-to-earnings ratio (TTM)
Net profit attributable to the parent company (TTM) year-on-year growth rate
The PEG ratio is usually calculated by dividing the price-to-earnings ratio (TTM) by the year-on-year growth rate of net profit attributable to the parent company (TTM). Here are the two components in the factor construction.
- :
Current stock price
- :
Net profit attributable to the parent company in the last 12 months
- :
Net profit attributable to the parent company in the last 12 months of the same period last year
factor.explanation
This factor is based on the core idea of the PEG ratio, which is to combine the price-to-earnings ratio with earnings growth. When the price-to-earnings ratio is high but the earnings growth rate is also high, it means that investors may have high expectations for the company's future growth potential, so the stock may not be overvalued. On the contrary, if the price-to-earnings ratio is high but the earnings growth rate is low, it means that the market may overvalue the stock, and the investment attractiveness of the stock is relatively weak at this time. This factor aims to capture undervalued growth stocks with low market expectations but high earnings growth potential. It should be noted that the effectiveness of the PEG ratio depends on the stability and predictability of earnings growth. For companies with large growth fluctuations, the effectiveness of this indicator may be reduced.