Meta Platforms (META -1.16%) stock has been on an incredible winning streak. As it integrates artificial intelligence (AI) across its platforms and implements efficiency initiatives to reduce its operating costs, the social media giant has been serving up impressive business performance. Propelled by strong sales and earnings results, the company's share price is up by 73.5% over the last year alone.
Zoom a bit further out and the stock's run becomes even more impressive. Meta stock has risen roughly 370% over the last two years. On the heels of that massive rally, the company now has a market capitalization of $1.55 trillion and ranks as the world's seventh-largest business.
On the heels of that run-up, it's not unreasonable to wonder whether the stock has gotten too expensive. But there are good reasons to think that Meta still offers long-term upside potential -- and one chart in particular suggests the stock is poised to keep rallying.
Meta Platforms stock still looks cheap by this key metric
The price/earnings-to-growth (PEG) ratio measures a company's share price against the rate at which its earnings are increasing. Take a look at the chart below, which depicts Meta's forward PEG ratio.
META PEG Ratio (Forward) data by YCharts.
Because the PEG ratio measures the rate at which a company's price-to-earnings ratio has increased against the actual rate at which earnings have increased or are expected to increase, a PEG of less than 1 is often viewed as a sign that a stock is undervalued. This is because the company's earnings multiple is rising at a slower rate than its profits.
With a forward PEG of roughly 0.34 as of this writing, Meta stock is well below the level typically viewed as the threshold for an undervalued stock. While the company may have a harder time delivering relative growth on the heels of its recent explosive profit growth, the shares still look non-prohibitively valued at current prices.
