Stocks are setting repeated highs, reigniting a perennial debate among investors about whether they are too expensive. If earnings decline, that makes stocks look even more expensive at the same price levels. A PEG of 1 indicates the stock’s price is in line with its growth expectations. It is calculated by dividing a stock’s current price with its average inflation-adjusted earnings from the previous 10 years. That smooths out periods such as just before the housing bust, when unusually strong earnings made stocks look reasonably priced, and postrecession recoveries, when weak earnings make stocks look expensive.

Source: Wall Street Journal February 12, 2024 05:47 UTC