There are plenty of metrics to sort through when trying to dig up value stocks, but one in particular — “PEG” — can help you find hot growth amid the bargains.
Case in point: Qihoo 360 Technology (QIHU).
This Chinese stock has been the hottest Internet stock of the year. In 2013 alone, shares have soared nearly 170% — handily dwarfing rivals across the globe. And that has come on absolutely red-hot growth.
However, investors who haven’t jumped in yet are likely scratching their heads thanks to QIHU’s high valuation, which at a price-to-earnings ratio (P/E) of nearly 40 times expected 2014 profits, looks awfully pricey compared to its Chinese Internet peers.
That’s where PEG — or price/earnings-to-growth — comes in.
You see, as Barron’s points out, “much of Qihoo’s valuation lies within the growth value,” which is why Qihoo’s PEG — which not only factors in current earnings, but also it’s growth rate — is the better number to look at. A PEG above 1 signifies an overvalued stock, while under 1 signifies that it’s undervalued, thus QIHU’s PEG for 2013-15 of 0.5 is pretty attractive, and better than its peers’ average of 0.8.
But Qihoo isn’t the only growthy stock sitting pretty with a low PEG. Here are three other stocks that look like bargains when you consider the big growth they’re slated to post: