THE LOWER THE PEG RATIO , THE MORE THE STOCK MAY BE UNDERVALUED GIVEN ITS EARNINGS PERFORMANCE. THE DEGREE TO WHICH A PEG RATIO VALUE INDICATES AN OVER OR UNDERPRICED STOCK VARIES BY INDUSTRY AND BY COMPANY . PEG RATIO BELOW ONE IS DESIRABLE . BUT THIS IS NOT ONLY CRITERIA FOR STOCK SELECTION. BECAUSE PEG RATIO DEPENDS ON HISTORICAL FACT WHICH MAY BE WRONG IN FUTURE. SUPPOSE INDUSTRY MAY FACE RECESSION or INPUT COST GO HIGH DUE TO LESS SUPPLY . OR GOVT REGULATION IMPACT ON INDUSTRY . OUTPUT DEMAND DECREASES IN THE COUNTRY ,TECHNOLOGY UPGRADATION IMPACT ON INDUSTRY ETC.