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Technology Stocks : Citrix Systems (CTXS)
CTXS 103.900.0%Nov 2 5:00 PM EST
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To: David Montgomery who wrote (7430)12/19/1999 12:48:00 AM
From: Chuzzlewit  Read Replies (1) of 9068
 
David,

The PEG ratio is really rather simple. It was developed as a valuation technique for growth stock. Basically, it works this way: you divide the P/E of a stock by its long-term growth rate. If the ratio is less than 1.00 it is considered undervalued. If the ratio is above 1.00 it is overvalued. If it is exactly 1.00 it is properly valued.

If you go back to read the post I mad to Mike you can see three of the problems with the PEG ratio. It is insensitive to interest rates; it is insensitive to market risk; it is insensitive to cash flow.

TTFN,
CTC
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