Back to top featured highlights: Chemours, First Data, PulteGroup, Raymond James Financial and United Rentals

Read MoreHide Full Article

For Immediate Release

Chicago, IL –July 26, 2017 - Stocks in this week’s article include Chemours Co. (NYSE: CC Free Report), First Data Corp. (NYSE: FDC Free Report), PulteGroup (NYSE: PHM Free Report), Raymond James Financial (NYSE: RJF Free Report) and United Rentals (NYSE: URI Free Report).

PEG Ratio vs. P/E Ratio

Which valuation metric is better: the PEG ratio or the P/E ratio?

Before we answer that question, let's first start with some basics.


The P/E ratio is simply: Price / Earnings

Essentially, this tells you how much an investor is willing to pay for each unit (year) of earnings. If a stock is trading at a P/E ratio of 30, it is said to be trading at 30x times its annual earnings.

In general, the lower the P/E ratio the better. A common threshold for many investors is a P/E of 20 or less. (For the record, at the time of this writing, the S&P 500 Index was trading at a P/E (using F1 Estimates) of 15.33.)

A PEG ratio is the: P/E Ratio divided by the Growth Rate

Conventional wisdom says a value of 1 or less is considered good (at par or undervalued to its growth rate), while a value of greater than 1, in general, is not as good (overvalued to its growth rate).

Many believe the PEG ratio tells a more complete story than just the P/E ratio. (The S&P at the time of this writing had a PEG ratio of 1.93.)


Let's take a look at both of these in action.

For example: 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 0.80 (40 / 50= 0.80).

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, however, is actually the better bargain since its PEG ratio is lower (0.80) and is trading at a discount to its growth rate.

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

So which one is better?

They both have their usefulness. I do like how the PEG positions the P/E ratio in relation to its growth rate to put everything into perspective.

Quite frankly, I use both, so I'm going to say it's a tie. Plus, you couldn't even create the PEG ratio without the P/E.

But, you don't have to choose one or the other. You can use both. And that's how we're using it in this week's screen.

Screen Parameters

Let's first start with:

Zacks Rank less than or equal to 2
(Only stocks with a Zacks Rank #1 Strong Buy or #2 Buy can get thru.)

Projected One Year Growth Rate greater than S&P 500
(Market outperformers are what we're looking for. The 1 year projected growth rate for the S&P is currently 7.94%. So only those above that will qualify.)

P/E Ratio (using F1) less than or equal to 20 AND less than or equal to X Industry Median
(Not only do we want our P/Es to be below their classic valuation threshold, but we want them to be below the median for their industry as well.)

PEG Ratio less than or equal to 1 AND less than or equal to X Industry Median
(P/E divided by its (F1) projected growth rate. This one also has to be below its classic valuation marker and have a PEG ratio below the median for its industry. This ensures that they are considered undervalued on an absolute basis as well as undervalued relative to its group of peers.)

Price greater than or equal to $5

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

This screen will find stocks with market beating growth rates, yet still be considered undervalued on two of the most effective valuation markers. And of course, with the Zacks Rank added to it, each one of these picks will be experiencing upward earnings estimate revisions, which provides a timely catalyst for the stock to move.


Here are 5 stocks from this week's list, along with their P/E ratio (using F1 Estimates) and their PEG ratio (using F1 Projected Growth Rates):

Chemours Co. (NYSE: CC Free Report) (P/E: 13.24, PEG: 0.85)

First Data Corp. (NYSE: FDC Free Report) (P/E: 14.54, PEG: 0.76)

PulteGroup (NYSE: PHM Free Report) (P/E: 10.94, PEG: 0.73)

Raymond James Financial (NYSE: RJF Free Report) (P/E: 16.79, PEG: 0.99)

United Rentals (NYSE: URI Free Report) (P/E: 12.04, PEG: 0.89)

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 first before you invest. Know what to buy and when to sell. You can do it.

Click here to sign up for a free trial to the Research Wizard today.

About Screen of the Week created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here

About Zacks is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .

Get the full Report on CC - FREE

Get the full Report on FDC - FREE

Get the full Report on PHM - FREE

Get the full Report on RJF - FREE

Get the full Report on URI - FREE

Follow us on Twitter:

Join us on Facebook:

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Contact: Jim Giaquinto


Phone: 312-265-9268


Visit: provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. .

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit

for information about the performance numbers displayed in this press release.

More from Zacks Press Releases

You May Like