DOW JONES REPRINTSThis copy is for your personal, non-commercial use only. To orderpresentation-ready copies for distribution toyour colleagues, clients or customers, usethe Order Reprints tool at the bottom ofany article or visit:www.djreprints.com.• See a sample reprint in PDF format.• Order a reprint of this article now.October 19, 2006SMARTMONEY STOCK SCREENBargain Growth StocksBy JACK HOUGHOctober 19, 2006; Page D3The price/earnings ratio is less telling than some investors believe. A low one doesn't mean astock is cheap. It could mean the company is deeply flawed or that it operates in a slow-growth industry. In broad studies low P/E shares outperform high P/E ones, but that's littlehelp in trying to tell whether a stock is a bargain.The PEG ratio is a bit more useful. It divides a stock's P/E by the rate at which analysts expect the company's earnings to growover the next several years. A stock with a P/E ratio of 18 and a projected earnings growth rate of 12%, for example, has a PEGof 1.5 (about the broad market's average). One with the same P/E but projections for half of the growth has a PEG of 3.
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