But some economists reckon that now might be a good time to come off the peg.
The PEG ratio makes no assumption for how the business or you reinvest earnings.
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The lower the PEG, the more growth an investor can buy for his money.
Not only did the peg hold, but the government made windfall profits when share prices recovered.
The economic risks in abandoning the peg are smaller than many in Beijing believe.
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They also invited speculation from currency traders placing self-fulfilling bets that the peg would not hold.
Therefore, to Peter Lynch, at fair value, the PEG ratio of a growth company should be 1.
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For this reason, we believe that the peg to a basket of currencies will remain in place.
Moreover, the PEG ratio of 1.1, though seemingly overvalued, is less than the 2.2 similar firms offer.
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Not only did the peg hold, but the government made windfall profits when share prices subsequently recovered.
This casts doubt on the peg which links the value of Hong Kong's currency to the dollar.
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But as the dollar appreciated in the late 1990s, the peg turned into a straitjacket for Argentina.
And behind-the-scenes efforts were made during 2001 to persuade the Argentine government to abandon the peg to no avail.
The simplest way to do that is for the currency to strengthen, but the peg prevents nominal appreciation.
But the recent round of devaluations and the peg's resilience has suddenly turned long-term problems into short-term ones.
With the dollar steadily sliding, China has resisted pressure to drop the peg.
The market, though, plainly expects the peg to stay for a while yet.
Argentina was forced to break the peg and default in late 2001-early 2002.
Is he bothered by the peg of the yuan to the dollar, something a good number of countries similarly pursue?
But here is where we bump up against my point: the fallacy of the PEG ratio as a valuation measure.
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Before Bosnian officials fixed the national currency against the euro in 2002, they used the Deutsche mark as the peg.
At the same time, the high interest rates defending the peg are threatening to erode corporate profits and the property market.
In the fifteen months have elapsed since the peg was abandoned, a third, maybe even half, of the gap has vanished.
Very importantly, the PEG ratio treats all 0.76x ratios as being the same , when in fact they are very different.
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The PEG ratio also comes in at 0.60, a 40% discount to the benchmark of 1 for a fairly priced stock.
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The PEG ratio, slightly under 1, tells me the stock will clearly outperform the market for at least three to five years.
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This measure, popular with growth-stock fans, is often called the PEG ratio.
The PEG ratio for the stock is 0.71, based on a 3- to 5- year earnings per share growth rate of 15%.
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While letting interest rates rise to defend the peg, it has also appeared keen to bring them down again swiftly after speculative attacks.
He could defend the peg, but that would again drive up interest rates, pull down stock prices and squeeze the economy in a deathgrip.
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