When the PEG ratio for a stock is less than 0.5,this indicates that the
A)market believes the earnings growth estimate reflected in the consensus forecast is too low.
B)market expects the future EPS growth to be greater than currently reflected in the analysts' consensus forecast EPS.
C)stock is overvalued.
D)stock is undervalued.
E)stock is correctly valued.

Question

Quizplus · Accepted Answer

A PEG ratio of less than 0.5 suggests that the stock is undervalued, as it implies that the stock's price is low relative to the company's expected future earnings growth. This means that investors can purchase the stock at a relatively low price while also benefiting from expected growth in earnings.

When the PEG Ratio for a Stock Is Less Than