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The Essential P/E: Understanding the stock market through the price-earnings ratio by Keith Anderson

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Chapter 10. The PEG Ratio

Not many developments of the P/E ratio have become popular, despite the several decades that have gone by since use of the P/E became widespread. In fact the only development that has really caught on is the PEG ratio. This is a way of allowing for the fact that high-growth companies tend to have high P/Es. In the UK, Jim Slater’s two popular Zulu Principle books are both largely based on using the PEG as a stock selection tool to throw up cheap growth stocks. Slater helped to design Hemmington Scott’s Company REFS, which is one of the main information sources for UK private investors. PEGs are important there too, and your company only gets a PEG if (amongst other requirements) you can show a history of at least four ...

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