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 price-to-earnings 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!

Trina Solar (NYSE: TSL) is sporting a way-low PEG ratio of 0.5 today. The bottom line is expected to grow by about 21% a year over the next five years, and the stock is trading at a very low 10.5 times trailing earnings.

Here's how Trina Solar stacks up against some of its closest competitors in the market for photovoltaic solar-power modules:


Trailing P/E Ratio

5-Year Earnings CAGR Forecast

PEG Ratio

Trina Solar




Yingli (NYSE: YGE)




First Solar (Nasdaq: FSLR)




Source: Yahoo! Finance. CAGR = compounded annual growth rate.

Solar power is quite literally hot, what with a rising global focus on green energy and the ever-looming threat of peak oil. Trina Solar taps into that trend while riding the Chinese government's wide-ranging infrastructure investments. The company is already profitable, unlike some of its rivals and compatriots, and the low PEG ratio points to a possibly undervalued stock. What's not to love about this Rule Breaker?

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 very low PEG ratio backed up by a strong business, I'd say that you should get to know Trina Solar a little better. This stock rocks!

Fool contributor Anders Bylund doesn't hold a position in any of the companies discussed here. First Solar is a Motley Fool Rule Breakers pick. 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.