The PEG ratio and the VEG ratio are two names of the same thing. have to be the

Question

The PEG ratio and the VEG ratio

are two names of the same thing.

have to be the same for a firm that has its shares trading in the open market.

rely the same rule in terms of determining the over or under valuation.

use growths in different items in their denmiantor (divisor).

are two names of the same thing.

have to be the same for a firm that has its shares trading in the open market.

rely the same rule in terms of determining the over or under valuation.

use growths in different items in their denmiantor (divisor).

Explanation / Answer

Rely the same rule in terms of determining the over or under valuation.

PEG ratio stands for Price Earnings to Growth and VEG ratio stands for Value Earnings to growth. For both the ratios if it is equal to 1, the security is correctly priced, if it is below 1, the security underpriced and if it is above 1, the security is overpriced.

Thus, both the ratios work in the same manner in determining underpriced or overpriced securities.

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