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!

IMAX (Nasdaq: IMAX) is sporting a way-low PEG ratio of 0.8 today. The bottom line is expected to grow by about 23% a year over the next five years, and the stock is trading at a very reasonable 19 times trailing earnings.

Here's how IMAX stacks up against some of its closest competitors in the market for movie exhibitors:

Company

Trailing P/E Ratio

5-Year Earnings CAGR Forecast

PEG Ratio

IMAX

19

23.3%

0.8

Regal Entertainment Group (NYSE: RGC)

34.9

10.2%

3.4

Carmike Cinemas (Nasdaq: CKEC)

N/A

7.4%

N/A

Cinemark Holdings (NYSE: CNK)

11.9

9.7%

1.2

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

It's not really fair to call any of these other companies "competition" for IMAX, since there's no other larger-than-life specialist available anywhere. The moat around this company is both deep and wide, and most of the other theater chains are actually IMAX partners these days.

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 IMAX a little better. This stock rocks!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. IMAX 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.