# Screen of the Week

This week, I'm going to focus on a simple strategy that uses the PEG Ratio for determining a company's under or overvaluation.

A PEG ratio is simply the:

P/E Ratio divided by the Growth Rate

A value of 1 or less is considered good (at par or undervalued), while a value of greater than 1, in general, is not as good (overvalued).

Once again, the PEG Ratio is simply the P/E Ratio divided by the Growth Rate. Many believe this ratio tells a more complete story than just the P/E.

A company with a P/E Ratio of 25 and a Growth Rate of 20 would have a PEG Ratio of 1.25 (25 / 20 = 1.25).

While a company with a P/E Ratio of 40 and a Growth Rate of 50 would have a PEG Ratio of 0.8.

Traditionally, investors would look at the stock with the lower P/E Ratio and deem it a bargain (undervalued). But looking at it closer, you can see it doesn't have the growth rate to justify its P/E.

The stock with the P/E of 40, though, is actually the better bargain since its PEG Ratio is lower (0.8), implying it's undervalued with more potential value. (Undervalued in relation to its projected growth rate.)

In other words, the lower the PEG, the better the value because the investor would be paying less for each unit of earnings growth.

So for this week's screen, we're going to use the PEG ratio to find value.

• PEG Ratio less than 1
(P/E using F(1) divided by its F(1) projected growth rate.) (We're using a classic, textbook example to identify undervalued stocks.)

• Average Broker Rating less than or equal to 1.5
(The brokers have to be on board too.)

• Average Broker Rating Change over last 4 weeks greater than 0
(Only stocks that have been recently upgraded will get thru.)

• Price greater than or equal to \$5

• Avg. 20 Day Volume greater than or equal to 100,000

Here are 5 stocks from this week’s list:

(AVT - Analyst Report) Avnet, Inc.
(CKSW - Snapshot Report) ClickSoftware Technologies Ltd.
(EXPR - Snapshot Report) Express, Inc.
(KAI - Snapshot Report) Kadant Inc.
(MET - Analyst Report) MetLife, Inc.

Sign up now for your 2 week free trial to the Research Wizard and get the rest of the stocks on this list and start using this screen in your own trading. Or create your own strategies and test them before you invest. Know what to buy and when to sell.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

# Zacks Investment Research

## Close

Are you a new Zacks Member or a visitor to Zacks.com?

# My Portfolio Tracker

## Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

# More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

# Zacks #1 Rank Top Movers for Aug 30, 2014Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%