Discussion (200 words): The Peg Ratio (price-earnings-growth) appears to be a refinement that allows us to do what? Is the ratio aptly named? Explain and discuss.
Respond to these two classmates’ discussion post (50-100 words for each response):
Discussion post 1: The PEG ratio stands for price/earnings-to-growth ratio which is the stock’s P/E ratio divided by the growth rate of the earnings for a specific time period. The Peg ratio was developed to factor in the projected growth rate of future earnings from the standard P/E ratio. The Peg ratio can allow investors a better assessment at how fast a company is growing thus providing us a better picture of a company’s value than only using the P/E ratio alone. The interpretation of the ratio is as followed, when the ratio results in 1 or lower, it means the stock is either at par or undervalued and if above 1, the stock is overvalued relative to the growth rate. Generally, when using the Peg ratio, the higher return for investors are companies that have a faster growth rate. If comparing two companies, one company has a growth rate of 5% and the other has a growth rate of 10%, through the peg ratio, it takes into account a company’s earning growth whereas p/e ratio does not and the company with 10% growth would be the better investment for investors.
Peg ratio does provide more meaningful information regarding the value of a stock or two similar stocks because of the added factor of growth potential. Although the peg ratio can allow investors another instrument to value stocks, it may not be a completely reliable ratio. Other metrics should be used to value a stock along with the peg ratio for proper valuation. The reason the peg ratio can carry risks is because the factor of future earnings growth potential is an estimation which creates uncertainty within the overall ratio. I believe it is aptly named as the peg ratio because it compares a company’s P/E ratio to the expected rate of growth to assess a stock’s value.
Discussion post 2: The PEG ratio (Price/Earnings to Growth Ratio) is a valuation metric that looks at the price of a stock, the earnings per share, and also the company’s growth potential. The Price/Earnings ratio is generally higher for a company that has a higher growth rate. Using the P/E ratio would make companies with significant amounts of growth appear overvalued when compared to others. The assumption that incorporating a company’s growth rate, the ratio is going to be better for comparing companies with various growth rates. A PEG ratio of 1 supposedly represents a fair trade-off between cost and growth, which indicates that a stock is reasonably valued with the expected growth rate. A PEG ratio between 0 and 1 might suggest that the company might provide higher returns.
Yes, I think that the ratio has been aptly named. Investors might prefer the PEG ratio because it’s putting a value on the company’s expected growth earnings. The PEG ratio gives investors insight into a company’s high P/E ratio because it looks at a high stock price and incorporates the expected growth for the company.
Assignment (1-2 double space): There are various limitations to employing the PE Ratio for company to company comparisons. Describe several of the limitations. A better measure would be to employ the PEG Ratio, how would you calculate?

One of the risks you anticipated for the project was the late delivery of the prototype from the vendor. You adjusted your project schedule to minimize the impact of the risk, built in a penalty for late delivery, and created action plans in case the vendor delivered late. You also identified a risk with the vendor that they have very little technical depth; if the key engineer is not available to your project, the risk of a delay is even greater. You determined how you would monitor the vendor’s performance and ensure a timely delivery. You took a very risk-averse, protective approach to the relationship, but now, as the project is progressing, you are wondering if there is something you could do with the vendor to actually benefit the project instead of just protecting it.
Assignment Guidelines:
Create a 1-page addendum to your risk management plan that describes how you will modify the plans or create new plans relative to that vendor to create an opportunity that will result in lower costs, earlier delivery, higher quality, or other positive impacts.
Also, answer the following questions:

• What can you change in your plans to create an opportunity?
• What would that opportunity be?
• What is the probability that this opportunity could occur? What is the impact?
• What are the risks (adverse effect) that are introduced by this change in plans?
• How will you communicate this change to the vendor?

Your submitted assignment (250 points) must include the following:

• A 1-page addendum
• A 2 to 3 page document answering the questions above
• Submit both files as 1 zipped document to the drop box