So I’ve been reading this:
It explains about calculating the PEG ratio on a stock to help ascertain whether the stock is overvalued or not. Now the explanation makes complete sense, where you divide the P/E ratio with the EPS growth to give you a figure.
Now the part I want to check is this: Am I right in concluding from this that the higher the PEG number you come to, the more overvalued the share is? As in if you’re comparing two shares and share A comes with a PEG value of 3 and share B comes with a PEG value of 4, that share B is more overvalued than A? Is that right?
The reason I want to check is that Lloyds Bank (LLOY) currently has a PEG value of 0.09 (P/E of 23.81 divided by EPS growth of 262 to get to 0.0909), and before I move forward with this share, I just want to check if the PEG value is therefore very low or very high.