What is the PEG ratio used to compare?

The PEG ratio, which stands for Price/Earnings to Growth ratio, is a financial metric used to evaluate the valuation of a company by comparing its price-to-earnings (P/E) multiple to its earnings growth rate. This ratio provides insight into whether a stock is overvalued or undervalued by factoring in expected earnings growth.

When investors use the PEG ratio, they are effectively adjusting the P/E ratio to account for growth, allowing for a more nuanced comparison between companies that have different growth rates. A PEG ratio of 1 is often considered fair value, indicating that the stock's price is in line with its growth expectations. A PEG ratio below 1 may indicate that a stock is undervalued compared to its growth prospects, while a ratio above 1 may suggest overvaluation.

The other options in the question relate to different financial metrics that do not involve the growth aspect of earnings in conjunction with the valuation indicated by the P/E ratio. These metrics serve distinct purposes in financial analysis and do not fulfill the specific function that the PEG ratio accomplishes.