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    5 stocks from largecap space with right PEG ratio for long-term investor

    Synopsis

    PE ratio is one of the most overused and misused ratios. It is used by all and sundry to justify their valuations and create a mirage of value. Right from investor presentations to research reports, one finds its mention everywhere. But is this the right matrix to look at ? It is better to use PEG ratio when looking for long-term investment, though finding the right ratio is itself a challenge.

    In simple terms, it makes sense to pay more for a stock whose earnings grow at a faster rate. Now, how much more should be paid would be determined by dividing a company’s PE multiple with its growth ratio. So, Forward PE multiple is divided by the 5-year forecasted growth rate to arrive at the PEG ratio. Therefore, while a PEG ratio greater than 1 suggests a stock is overvalued; a PEG ratio of less than or equal to 1 would suggest that the
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    The Economic Times