ConverterHub

PEG Ratio Calculator

See if a stock's P/E is justified by its growth.

Result

1.33

How it is calculated

The PEG ratio adjusts the price-to-earnings multiple for growth: PEG = P/E / annual EPS growth. P/E is the share price divided by earnings per share, and growth is the expected yearly growth of earnings per share as a plain percentage number, so 15 means 15 percent, not 0.15. Growth must be greater than zero; a zero or negative growth rate gives no result because the ratio would be meaningless. A PEG near 1 is often read as price in line with growth, but this is a rule of thumb. It depends heavily on which growth estimate you use (trailing or forecast) and on the sector.

Worked example

A company trades at a P/E of 20 and earnings are expected to grow 15 percent a year. PEG = 20 / 15 = 1.33. The P/E is about one and a third times the growth rate, so the stock looks a little richer than a PEG of 1 would suggest.

Try this example →

Common mistakes

  • Typing growth as 0.15 instead of 15: the result becomes 100 times too large.
  • Using a P/E from one year and a growth rate from a different measure, such as revenue instead of EPS growth.
  • Relying on a single optimistic forecast; a small change in growth moves the ratio a lot.
  • Comparing PEG across very different sectors or between mature and early-stage firms.
  • Using negative or zero earnings growth: the tool returns nothing, and the ratio cannot be used then.

About this calculator

This calculator finds the PEG ratio (Price/Earnings-to-Growth), popularized by Peter Lynch: PEG = (P/E ratio) / (annual EPS growth rate, as a whole number, e.g. 15 for 15%). It adjusts the familiar P/E ratio for the company's expected earnings growth, so two stocks with the same P/E but different growth rates get different PEG scores.

Value and growth investors use it as a quick screen — a PEG near 1 is often read as fairly valued, below 1 as potentially undervalued relative to growth, and above 1 as potentially overvalued — though it works best for comparing similar companies in the same sector. Enter the P/E ratio and the earnings growth rate to get the PEG.

Was this helpful?

You can pick up to 3 reactions.

Comments (0)

  • Be the first to comment.

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators