How to Value a Stock in 5 Minutes (P/E, P/B, PEG)
Why a 5-minute framework?
A first filter that decides whether a stock deserves deeper research, saving days on companies not worth the time.
Step 1: P/E ratio
Compare to the stock's 5-year average, two or three competitors, and the index average (~22).
Step 2: P/B ratio
Below 1 = trading below book. 1–3 typical. Above 5 = premium pricing, justified only by high ROE or growth.
Step 3: PEG ratio
P/E ÷ EPS growth rate. PEG < 1 cheap, PEG ~ 1 fair, PEG > 2 expensive.
Frequently asked questions
Why not just P/E alone?
P/E ignores growth and balance sheet. Always layer in another ratio.
What's a DCF?
Discounted cash flow — a more thorough valuation that estimates the present value of future cash flows.
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