PEG Ratio is a valuation metric for determining the relative trade-off between the price of a stock, the earnings per share (EPS), and the company’s trailing EPS growth rate. A lower ratio is considered ‘better’ (cheaper) and a higher ratio is ‘worse’ (expensive).
PEG Ratio = (P/E Ratio) / Trailing EPS Growth Rate*
According to peterlynch EPS growth rate should be less than or equal to PE then PEG ratio = 1.
PEG ratio 1 and PE ratio shouble at lease 20 to compound money in 5 years double.
3 years double 24% EPS growth rate and PE ratio 24.
if the earnings growth rate of a company is 15%, Peter Lynch is willing to buy its share up to P/E = 15.
*Note, the growth rate is multiplied by 100 before this calculation.
Applying this formula, SBI Cards and Payment Services’s PEG Ratio is calculated below:
P/E Ratio [ 28.7 ]
(/) EPS Growth Rate * 100 [ 4.6 ]
(=) PEG Ratio [ 6.2 ]
Earnigns growth rate and PE Relation
| PEG Ratio | EPS growth rate | PE | Stock Price | double in years |
| 1 | 25% | 25 | 100 | 4 |
| 0.5 | 25 | 12 | 100 | 4 |
| 0.25 | 25 | 6 | 100 | 4 |
The tables below summarizes the trend in SBI Cards and Payment Services’s PEG Ratio over the last five years:
| Date | P/E Ratio | EPS Growth Rate | PEG Ratio |
|---|---|---|---|
| 2019-03-31 | NA | NA | NA |
| 2020-03-31 | 41.3 | NA | NA |
| 2021-03-31 | 97.8 | −38.0 | −2.6 |
| 2022-03-31 | 66.4 | 36.7 | 1.8 |
| 2023-03-31 | 31.2 | 84.7 | 0.4 |
Peter Lynch’s formula is:
meaning its P/E is less than or equal to its earnings growth rate.
Peter Lynch Fair Value = Earnings Growth Rate * EPS * PEG
PEG is set to 1 so we can ignore it in the calculation. Based on the formula,
= 25 x 25.32
= 632.92 vs market price 709
average growth rate of net income/earnings over the last 5 years *or (3/5/10years)
How does undefined’s PEG Ratio benchmark against competitors?
| Name | Ticker | PEG Ratio |
|---|---|---|
| Shalibhadra Finance Ltd | BSE:511754 | -7.15 |
| Ujjivan Financial Services Ltd | NSEI:UJJIVAN | -5.48 |
| Trucap Finance Ltd | NSEI:TRU | 0.01 |
| Hasti Finance Ltd | BSE:531387 | 0.02 |
| Financials | SECTOR:FIN.IN | 0.13 |
| Manappuram Finance Ltd | NSEI:MANAPPURAM | 0.15 |
| MAS Financial Services Ltd | NSEI:MASFIN | 0.88 |
| Sundaram Finance Ltd | NSEI:SUNDARMFIN | 0.95 |
| Cholamandalam Investment and Finance Company Ltd | NSEI:CHOLAFIN | 0.99 |
| American Express Company | NYSE:AXP | 1.38 |
| Shriram Finance Ltd. | NSEI:SHRIRAMFIN | 2.43 |
| SBI Cards and Payment Services Ltd | NSEI:SBICARD | 6.19 |
SBI Cards and Payment Services’s latest twelve months peg ratio is 6.19
PEG Ratio In The Financials Sector
| Economic Risk Region | Developing |
| Total Constituents | 1,663 |
| Included Constituents | 1,597 |
| Min | -7.05 |
| Max | 8.88 |
| Median | 0.06 |
| Mean | 0.16 |
| Standard Deviation | 1.51 |
