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The PEG Ratio for GARP Investors

For the GARP investor, a PEG ratio (price/earnings ratio divided by its year-over-year earnings growth rate) of 1 or less is a good indicator that the company warrants further analysis. For example, a company with a P/E ratio of 15 and a projected growth in earnings of 25%, or 15/25 equals a PEG ratio of 0.6 and, would be considered a good investment by most GARP investors. While a 1 or less is desired, companies with a PEG ratio of around 0.5 are considered better as they have good growth potential but, are also slightly under valued - Growth at a Reasonable Price!