PEG Payback Period

AAA

DEFINITION of 'PEG Payback Period'

A key ratio that is used to determine the time it would take for an investor to double their money in a stock investment. The price-to-earnings growth payback period is the time it would take for a company's earnings to equal the stock price paid by the investor. A company's PEG ratio is used rather than their price-to-earnings ratio because it is assumed that a company's earnings will grow over time.

INVESTOPEDIA EXPLAINS 'PEG Payback Period'

The best reason for calculating the PEG payback period is to determine the riskiness of an investment. Generally the longer the payback period the more risky an investment becomes. This is because the payback period relies on the assesment of a company's earnings potential. It is harder to predict such potential further into the future, and subsequently there is a greater risk that those returns will not occur.

RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. Price/Earnings to Growth and Dividend ...

    A variation of the price-to-earnings ratio where a stock's value ...
  3. Risk

    The chance that an investment's actual return will be different ...
  4. Price/Earnings To Growth - PEG ...

    A stock's price-to-earnings ratio divided by the growth rate ...
  5. Payback Period

    The length of time required to recover the cost of an investment. ...
  6. Price-Earnings Ratio - P/E Ratio

    A valuation ratio of a company's current share price compared ...
Related Articles
  1. Forex Education

    How To Use The P/E Ratio And PEG To Tell A Stock's Future

    While the price-to-earnings ratio is commonly used for assessing stock prices, the price/earnings-to-growth ratio offers forecasting advantages that investors need to know.
  2. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  3. Markets

    Understanding The P/E Ratio

    Learn what the price/earnings ratio really means and how you should use it to value companies.
  4. Investing Basics

    What's a P&L Statement?

    A profit and loss statement, also called the income statement, is a financial statement that companies use to report their income and expenses for a quarter or a year.
  5. Investing

    When computing the PEG ratio for a stock, how is a company's earnings growth rate determined?

    Remember that the price/earnings to growth ratio (PEG ratio) is simply a given stock's price/earnings ratio (P/E ratio) divided by its percentage growth rate. The resulting number expresses how ...
  6. Investing

    PEG Ratio

    Learn more about how this ratio is used to determine a stock's value based on its earnings growth.
  7. Investing Basics

    How To Find P/E And PEG Ratios

    If these numbers have you in the dark, these easy calculations should help light the way.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center