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I think Peg ratio is a useful concept, but like most measures its more useful as a blinking light calling for more research than as an absolute, x is better than y. Because as you note the estimates of future earnings are often a bit fuzzy.

If the ideal PEG ratio is 1.0 and the typical S&P 500 company has a PE of 16, that ideal company has to have a 16% growth rate. How many companies do that well for the long term? Many fine companies should have PEs of 7 or less. Not many do.

Similarly if the PEG ratio is high, how long must the earnings grow for the PEG ratio to fall to 1.0. Its hard for companies to maintain large growth rates year after to year. So a PE over about 30 is hard to sustain. I'd be very cautious about such stocks. High PE stocks can be very volatile. I think they take special skills for investors who own them. Most of us can stand a few of them in the portfolio, but not too many. Choose those carefully. And good luck.
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