PEG Ratio

There's one measure of valuaton, PEG ratio which attempts to compare companies or sectors with differing growth rates. The PEG takes the price/ earnings ratio and divides it by the expected earnings per share growth. The lower the number, the more attractively valued the company or sector.

Take IJM and Gamuda.

IJM at RM6.45 (before ex.) PE = 645/32 = 21. Expected earning per share = 24. So PEG is less than 1.0

Gamuda at RM3.23. PE = 323/ 16 = 20. Expected earning per share = 8. So PEG is about 2.5

Both companies have similar PE ratio but expected eps for IJM is higher. Which then is an attractive valued stock..?

You can do this simple exercise for several of the companies you're contemplating buying into and post your comments here.