What is the Value on the Move — PEG With Est Growth Screen?
The Value on the Move — PEG With Est Growth Screen is a rules-based stock screen published by the American Association of Individual Investors (AAII). No single famous manager stands behind it; it grew out of AAII's own work on growth at a reasonable price, the investing style known as GARP. The name states the goal. "Value" is the reasonable price — a company whose price-earnings ratio is low next to its growth. "On the move" is the improvement — earnings that are rising and a share price the market has already begun to reward. What sets this particular version apart is the growth rate it feeds into the PEG ratio: the estimated, forward-looking figure that analysts forecast, rather than the growth a company has already booked.
The PEG ratio, priced off the forecast
The PEG ratio takes a stock's price-earnings multiple and divides it by an earnings growth rate. A P/E of 20 on a company growing 20% a year produces a PEG of 1.0; the same multiple on 40% growth produces 0.5. A smaller number means you are paying less for each point of growth, and a reading around one or below has long been read as a stock the market has not yet fully priced for its expansion. Catching that gap — buying before the multiple climbs to match the growth — is the entire aim.
A PEG is only as meaningful as the growth rate inside it, and that rate is where the two Value on the Move screens part ways. This one uses estimated growth: the I/B/E/S consensus long-term EPS growth forecast, an average of what the analysts covering the stock expect over the next several years. The reasoning is that a P/E already embodies expectations of the future, so measuring it against expected growth keeps both sides of the ratio forward-looking. The companion screen instead divides by the realized five-year growth rate, and that one swap — the forecast versus the track record — is the core distinction between the two. Each choice carries a cost: the estimate looks ahead to where earnings are going, but it is only as sound as the forecast behind it.
What the Value on the Move — PEG With Est Growth Screen looks for
- Companies that trade over the counter (OTC) are left out.
- The PEG ratio — the current price-earnings ratio divided by the estimated EPS growth rate — is greater than 0.2 and no higher than 1.0.
- Earnings per share from continuing operations are positive for the most recent 12 months and for each of the last five fiscal years.
- Same-quarter earnings growth — each quarter measured against the same quarter a year earlier — is positive for each of the last four fiscal quarters.
- The stock's 26-week relative price strength ranks in the top 70% of the whole database, a percentile rank of 70 or higher.
Why forward growth can find value on the move
The two PEG limits work as a pair. The ceiling of 1.0 enforces the "reasonable price" and keeps out stocks the market has already bid up past their growth. The floor of 0.2 quietly discards readings that look too cheap to believe — a PEG that low usually means the growth forecast has been inflated by a depressed base year or the P/E is collapsing on a company in trouble, neither of which is the bargain it appears to be.
The remaining filters check that the growth is genuine and current. Five straight years of positive earnings, plus four consecutive quarters of year-over-year gains, describe a business that is compounding rather than posting one good stretch. The relative-strength requirement is the "on the move" confirmation: a stock in the top 30% of price performance over the past half-year is one the market is already voting up. For a screen built on forecasts, that price action matters — it suggests the estimates are being believed and acted on, not merely typed into a model.
What to keep in mind
The screen's strength is also its exposure. Its value test rests on a number nobody can verify yet, and the research is unkind here: analysts tend to be too optimistic about the long-term growth of exactly the high-expectation firms a PEG screen surfaces. When a lofty forecast is cut, the damage compounds — the earnings estimate falls and the P/E often falls with it. Coverage is thin on smaller companies, so many never generate a consensus estimate to screen on at all, narrowing the list toward larger, well-followed names. Treat a passing stock as a candidate whose forecast you still have to judge, not a verdict. The screen is a first pass, not a buy list.
Sources
American Association of Individual Investors (AAII) — Stock Investor Pro screen definition and commentary for the Value on the Move — PEG With Est Growth Screen.
The PEG ratio at the heart of the screen was popularized by Peter Lynch in One Up on Wall Street (1989), which treated a low price-earnings ratio relative to earnings growth as the mark of an undervalued grower.