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Definition

A ratio which is designed to show whether a share is cheap or expensive at the current market price, in relation to its track record of growing earnings per share over a period of time. For example, Capitec Bank has the following track record of growing earnings per share (EPS) since 2003:
<figure class="container-fluid"><img class="img-responsive" style="display: block; margin: 0 auto; max-width: 100%;" src="/onlinecourse/img/glossary/PE-Growth.png" alt="price earnings growth ratio" />
<figcaption style="text-align: center;">Price Earnings Growth Ratio</figcaption>
</figure>
Capitec's average EPS percentage growth over that period of 13 years is 37,9% per annum. Its current P:E ratio is 23,73 - and this enables us to calculate the P:E Growth ratio by dividing its P:E by its average EPS Growth - 23,73/37,9 = 0,63. If the P:E Growth is below 1 it is worth looking at and may be under-priced. Ratios above 1 are on the expensive side and should be viewed with caution.

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