A metric used to evaluate the attractiveness of a stock by comparing its price-to-earnings ratio with its earnings growth. It is calculated by dividing the price-to-earnings ratio by the annual earnings growth rate. The PEG ratio is considered superior to the PE ratio since it evaluates a stock in relation to its earnings growth. For example, the PEG ratio would suggest that a stock with a low PE is not necessarily a better buy than a stock with high PE if the latter has a sufficiently higher rate of earnings growth. The metric was popularised by American investor Peter Lynch through his 1989 book One Up on Wall Street .
