Meaning, the valuation of the company may still seem ok even though its PE ratio is high - relative to its growth rate. So if a company has a PE ratio of 30, but its growth rate is 60%, its PEG ratio is less than one, which may show that the company is undervalued relative to its growth rate. Simply put, PEG ratio is the PE ratio of a company over its EPS growth rate. Peter Lynch is also the one that I learned PEG ratio from. I use it when I look at a fast-growing company with a high PE (price to earnings ratio). One thing that I look out for when analyzing fast growers is the PEG ratio. These kinds of companies tend to be underappreciated.įrom my experience, fast growers tend to sell at a premium. The best kind of stock for fast growers are those that not owned by many institutions and are rarely heard - and they do not have a lot of analyst coverage yet. The key to investing in this type of company is to be wary and exit when the growth rate slows down. The first type of company is called fast growers.įast growers are companies that have proven to be able to grow their earnings per share by about 25% a year on average. In Peter Lynch's one up on wall street, he views investments in the stock market based on six types of companies. Peter Lynch One Up on Wall Street Key Takeaways: He managed the Magellan Fund at Fidelity Investments between 19 and returned an average of 29.2% per year in those times. Peter Lynch is a legendary value investor that has one of the best investing track records ever.
I probably first read the book when I was about the age of 20 or 21, and now, after about five years in the market, I can tell you that the lessons hold. Peter Lynch's one up on wall street book was one of the first investing books that I read.
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