The Risk Adjusted PEG Ratio, or PEGR, is the PEG ratio adjusted for risk. It is calculated as the Rolling PEG Ratio multiplied by the Beta of the share price. This is measured on a rolling basis and earnings are diluted and normalised.
Portfolios of low PEGR stocks have been shown to outperform both low PE and low PEG portfolios.
A paper by Javier Estrada accused the PEG itself of being one dimensional due to the fact that it takes no account of the riskiness of a company’s share price.
By adjusting the PEG by the share’s beta (derived from the volatility of the share price) analysts can find a far more effective version of the PEG we like to call the PEGR which is calculated as PEG x ß .
Take a simple example where company A is on a PE Ratio of 20 and a PEG of 0.5 versus company B which is on a PE Ratio of 10 and PEG of 0.5.
If company B was half as volatile as A, would it be a more attractive investment? The maths would suggest that, in general, the answer is yes.
Estrada's study shows that low PEGR portfolios outperform both low PE and low PEG portfolios on a risk adjusted basis, suggesting that it may well be the true king of the value factors.
You can read more about the PEGR This is measured on a rolling basis and earnings are diluted and normalised.
| Ticker | Name | PEGR | StockRank™ |
|---|---|---|---|
| LON:INDV | Indivior | -3.89 | 60 |
| LON:SBRE | Sabre Insurance | 0.01 | 80 |
| LON:RQIH | R&Q Insurance Holdings | 0.01 | 31 |
| LON:VLG | Venture Life | 0.01 | 84 |
| LON:ORIT | Octopus Renewables Infrastructure Trust | 0.03 | 53 |