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Price level |
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Price levelThe overall level of prices in a country, as usually measured empirically by a price index, but often captured in theoretical models by a single variable.Similar MatchesPrice elasticPrice elasticHaving a price elasticity greater than one (in absolute value). Price earnings growth factorPrice earnings growth factorThe PEG of a company is calculated by dividing its prospective P/E ratio by the estimated future growth rate in earnings per share of the company. So to calculate a PEG, you first need to calculate its P/E ratio.P/E = current share price divided by earnings per shareA company with a share price of 100p and earnings per share of 5p has a P/E ratio of 100/5 = 20.By itself the P/E ratio is a useful ratio because it shows how many times the current earnings the shares cost - in a sense, how many years you would have to wait to get your money back if the company paid out all its earnings to shareholders. But the limitation of the P/E ratio is that it looks at historical information and does not relate the price of the shares to its future performance. The PEG ratio builds in that extra layer of sophistication.Using the example of the same company, imagine that the consensus brokers' forecast for its future earnings growth rate is 15%.PEG = P/E divided by estimated future growth rateFor this company, the PEG would be 20 divided by 15 = 1.33.According to Jim Slater, the investor who popularised the use of PEG's as a stock share selection tool, a share with a PEG of 1 or lower is attractive. Put simply, the lower the PEG, the less you are being asked to pay for estimated future earnings. Jim Slater did not recommend use of the PEG as the only criteria of share selection. There are plenty of other fundamental checks that have to be made too.Note that the estimated future earnings are a critical part of the PEG calculation, and that if the forecasts made by brokers are wide of the mark, the PEG ratio will be unreliable. Because of this danger, most advocated of PEG's recommend using consensus forecasts, rather than the forecasts of any single broker/analyst. Basis priceBasis pricePrice expressed in terms of yield to maturity or annual rate of return. Tough on priceTough on priceFirm price mentality at which one wishes to transact stock, often at a discoun../../finance-glossary/premium that is not available at the time. GDP implicit price deflatorGDP implicit price deflatorAn economic technique used to account for inflation by comparing the current-dollar gross domestic product GDP to constant-dollar GDP as a ratio. The ratio accounts for price changes of goods and services that make up GDP and changes in the composite of GDP. Further SuggestionsAggregate exercise pricePrice weighted index Target price volume weighted average price Price specie flow mechanism Law of One Price Daily price limit Prices (of equity) subscription price Dollar price of a bond Realistic on price Commodity prices price to sales ratio Price leadership Price takers offer price Price immunization Price compression Price undertaking Price inelastic closing price Price of admission Equilibrium price Market price Implicit price deflator |
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