When companies grow without making acquisitions this is described as organic growth. Such growth is typically valued highly by investors. Price Earnings Growth Ratio (PEG) This is the Price Earnings Ratio divided by the annual growth rate in earnings per share. It is used to value growth. The idea is that a growth rate of 15 per cent is good value if the PER is 15 or less. The theory is that if shares in a growing business can be bought on a PEG of less than 1, there is the potential for a 'double whammy' effect as continuing growth leads to a re-rating of the shares onto a higher PE Ratio. Other commentators value growth shares more highly. For example, Benjamin Graham, author of The Intelligent Investor, Warren Buffett's favourite investment book, said the right valuation for a growth share was a PER of 8: this was the minimum value for a company showing zero growth, plus twice the sustainable growth rate. However he did not believe that any company could sustain growth above 15 per cent so the maximum PER in his system would be 38.
Growth based on expanding the existing trading base, rather than buying other businesses.
The growth rate of a company excluding any growth from acquisitions, divestments or exchange rate movements.
The growth rate of a company, excluding any growth from takeovers, acquisitions, or mergers.
Growth excluding the impact of exchange-rate differences and acquisitions or divestments.
Organic growth is the rate of business expansion through increasing output and sales as opposed to mergers, acquisitions and take-overs. Typically, the organic growth rate also excludes the impact of foreign exchange. Growth including foreign exchange, but excluding divestitures and acquisitions is often referred to as, core growth.