In this series of essays, each designed to demystify an aspect of the arcane language used by investment professionals, we have landed on the subject of ratios (the relationship between numbers) and we now consider a couple in some detail: first, a little revision on the price/earnings (P/E) ratio and then onto the price-earnings-growth (PEG) ratio.

When analysts get to work on evaluating whether a company’s shares are worthy of recommendation for a well designed portfolio, they seek to understand how it has performed and how that may indicate future outcomes: will the value go up, down, or sideways?