An Introduction
If you’re looking for AI companies primed for revenue and earnings growth, strong profitability, and upward analyst revisions, consider investing in one or more of the stocks highlighted in this article based on their current stock price relative to their forecast earnings growth over the next 12 months, i.e. their PEG ratio.
What Is the PEG Ratio?
The PEG ratio:
- provides a simple way for an investor to calculate how cheap a stock is relative to its growth rate by building upon a stock’s current price-to-earnings (P/E) ratio by factoring in its earnings growth prospects in the ensuing year,
- determines if a stock is trading at, above, or below, fair value and if the stock is priced above, or below, the industry median.
- A PEG ratio below 1.0 suggests that the stock price is undervalued relative to its expected future earnings growth. In other words, the market may not fully account for the company’s growth potential.
- Conversely, PEG ratios above 1.0 indicate that the stock price might be overvalued, as it isn’t necessarily supported by growth forecasts,
A PEG ratio should be used along with an analysis of the company’s balance sheet, debt burden, and cash flow and other valuation metrics that use the income statement and it’s important to understand things like a company’s competitive advantage, its addressable market, and its long-term growth prospects.
Please note: For
- a specific stock price performance (currently, yesterday, over the past 5 days, 1 month, 6 months and 1 year) go HERE, type in Stock Symbol, and Click on Time Period
- a specific stock’s performance statistics and financials go HERE, type in Stock Symbol, and Click on Statistics and Financials
- the reasons behind the price change in a specific stock go HERE and ask “Why did x stock change price so much this week?”
- the latest articles and analyses go HERE, type in Stock Symbol, and Scroll down to Recent News
Below is a list of the 8 major AI stocks with the best PEG ratios, in descending order:
- Taiwan Semiconductor (TSM): PEG Ratio: 0.52
- Tower Semiconductor (TSEM): PEG Ratio: 0.61
- Nvidia (NVDA): PEG Ratio: 0.68
- Advanced Micro Devices (AMD): PEG Ratio: 0.76
- Uber Technologies (UBER): PEG Ratio: 0.84
- Workday (WDAY): PEG Ratio: 1.01
- DocuSign (DOCU): PEG Ratio: 1.01
- Alphabet (GOOGL): PEG Ratio: 1.06
Please keep in mind that the above PEG ratios are the current stock prices of the day relative to the 12-month earnings estimates of the company and that they will vary throughout the trading day as the company’s stock price fluctuates – the PEG ratio will increase as the stock price rises and decrease as the stock price falls.
Conclusion
The above analysis provides the answer to the opening statement about looking for AI companies primed for revenue and earnings growth, strong profitability, and upward analyst revisions. You now have a short list from which to do your own due diligence before proceeding further.
