[GetThisCPA94]

It’s a PEG Ratio Question. In the book, online and hard copy, the PEG formula is stated as:

” PEG = (Stock Price Today / Expected EPS) / Growth Rate x 100 ”

The question is: An analyst notes the current price of X Enterprises stock is $15 per share while the EPS is $3. If the PEG ratio is 1.25, what has the analyst projected as the growth rate for X enterprises? The answer is 4%: ((15/3 / 4)) = 1.25. Why are they using the current EPS and not the expected EPS? There’s even an example in Becker where they specifically account for the expected EPS if the question only gives you the current EPS

The explanation in the question states that the formula is:

” PEG = (Stock Price Today / EPS) / Growth Rate x 100 ”

How do you not account for the expected EPS in this problem and instead calculate the current EPS? I’m baffled.

[f]

I know for the Price Earnings ratio, P0/E1 is the forward ratio and P0/E0 is the trailing ratio. Maybe it has something to do with that?

I don't know why they used current eps, but one way I would approach this question is to just plug in the answer options until I got a PEG ratio of 1.25

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