A firm has a stock price of $54.75 per share.The firm's earnings are $75 million and the firm has 20 million shares outstanding.The firm has an ROE of 15% and a plowback of 65%.What is the firm's PEG ratio?

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Quizplus · Accepted Answer

The PEG ratio is calculated as the P/E ratio divided by the growth rate. The P/E ratio is (Price per share / Earnings per share) = $54.75 / ($75 million / 20 million shares) = 14.6. The growth rate is ROE * plowback = 15% * 65% = 9.75%. Thus, PEG = 14.6 / 9.75 = 1.50.

A Firm Has a Stock Price of $54