The primary components of the Price-to-Earnings ratio are the company’s earnings and its stock’s market value. Earnings are critical to any company’s future prospects, but other factors are important, too.A company’s brand, its human capital, its expectations and the entry barriers it poses for competitors all affect a company’s earnings growth rate, which will ultimately affect its stock value. But to see the full picture, you need to look at the Price-to-Earnings ratio divided by annual EPS growth, which is called the PEG ratio. The growth rate describes either predicted or trailing growth over a one- to five-year span. Suppose a networking company has 20 percent annual net income growth and a Price-to-Earnings ratio of 50, while a brewing company has 10 percent earnings growth and a Price-to-Earnings ratio of 15. The networking company’s PEG ratio is 2.5, and the brewing company’s is 1.5. A lower PEG ratio means a better value in price and past or future growth. The networking company’s growth rate doesn’t justify its higher Price-to-Earnings ratio, so its stock appears overvalued. The PEG ratio provides more insight about a stock’s current value and future prospects.