The formula for PEG is (Price/future Earnings)/estimated Growth rate. For instance, if the price of a stock was $100 and it was expected to earn $10 over the next 12 months, its P/E ratio would be 10. Then, if the company was expected to grow at an annualized rate of 20% over the next five years, this would give the company a PEG of .500. Generally, the lower the PEG the better. However, because you are looking at future earnings and estimated growth rates, this metric is not as concrete as others, like Price/Book for example. This ratio can be found on any finance website, including Yahoo! and Google.

The price earnings ratio is influenced by: -the earnings and sales growth of the firms -risk -debt-equity structure of the firm -dividend policy -quality of management -a number of other factors

You have to see if the stock is growing in both sales and earnings. The price-to-earnings ratio is the best-known valuation gauge.

Price earnings ratio.

the price earnings ratio is simply earnings-per-share divided by the share price.

OOPS! I got that upside down! It is the share price divided by the earnings per share. The earnings figure might be for the trailing twelve months (ttm) or earnings estimated for the next four quarters.