Cheap stocks are great, but sometimes you get what you pay for. What's the use of a bargain-basement P/E ratio if the company can't grow? I have a long investment horizon and a high tolerance for risk, so I'm more interested in promising growth stocks than stodgy dividend machines.

To find stocks that satisfy my need for speed while also going on sale at a great price, I like to look at the PEG ratio. It's such a Foolishly useful metric that we've been known to call it the Fool Ratio. Divide the trailing P/E ratio of a stock by the estimated five-year earnings growth, and you have a neat little package representing the growth-adjusted value of the company. A fairly valued stock should land near the 1.0 mark. Higher numbers might indicate an overvalued security. A strong business with a low PEG ratio rocks!

Tyco Electronics (NYSE: TEL) is sporting a way-low PEG ratio of 0.56 today. The bottom line is expected to grow by about 22.5% a year over the next five years, and the stock is trading at a very reasonable 12.5 times trailing earnings.

Here's how Tyco stacks up against some of its closest competitors in its many markets:

Company

Trailing P/E Ratio

5-Year Earnings CAGR Forecast

PEG Ratio

Tyco Electronics

12.5

22.5%

0.56

Alcatel-Lucent (NYSE: ALU)

N/A

5%

N/A

Corning (NYSE: GLW)

8.0

11.2%

0.71

Molex (Nasdaq: MOLX)

40.6

10%

4.1

Amphenol (NYSE: APH)

18.2

14.7%

1.2

3M (NYSE: MMM)

14.5

12%

1.2

Source: Yahoo! Finance. CAGR = compound annual growth rate. N/A = not applicable.

Tyco Chairman Frederic Poses has been loading up on his own company's stock recently to take advantage of this delectable valuation. Moreover, the company pays a sizable yet eminently sustainable dividend.

What to do next
As with all simple tools, the PEG ratio isn't a silver bullet to solve your portfolio's every quandary. It is, however, a great starting point for further research -- fellow Fool Joey Khattab has shown low-PEG stocks beating the market in a 1,000-ticker sample.

With a ludicrously low PEG ratio backed up by a strong and growing business, I'd say that you should get to know Tyco Electronics a little better. This stock rocks!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. 3M is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.