PEG Ratio Calculator

Calculate a stock's PEG ratio to judge its P/E against expected earnings growth.

A P/E of 25.00 against 15% expected growth gives a PEG ratio of 1.67 (Potentially expensive relative to growth).

PEG Ratio

1.67

P/E Ratio

25.00

Stock Price

$150.00

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The PEG ratio takes the P/E ratio a step further by dividing it by the company's expected earnings growth rate, an attempt to judge whether a P/E is justified by how fast the company is actually growing. A high-growth company can reasonably carry a much higher P/E than a slow-growth one; the PEG ratio is a rough way to normalize for that difference.

A PEG ratio near 1 is the traditional rule of thumb for a fairly valued stock, a legacy of Peter Lynch's popularization of the metric, below 1 potentially undervalued relative to growth, and above 1 potentially expensive relative to growth.

How does this calculator work?

Enter the stock's price and annual EPS to compute the P/E ratio.

Enter the expected earnings growth rate, typically an analyst consensus estimate for growth over the next 3 to 5 years.

The calculator divides the P/E ratio by the growth rate (as a plain number, not a percentage) to get the PEG ratio.

PEG inherits the P/E's context problem and layers on a dependence on a growth forecast that may not hold. Read it beside a company's total return record and, for income stocks, the dividend yield and reinvested-dividend picture, since growth quality, not just quantity, is what a single ratio can't capture.

Worked example

A stock at $150 with $6.00 in annual EPS (a P/E of 25), and 15% expected annual earnings growth.

P/E ratio: 25.00
Expected growth rate: 15%
PEG ratio: 1.67

How the numbers work

Dividing the P/E of 25 by the growth rate of 15 gives a PEG of 1.67, above the traditional "fairly valued" threshold of 1, suggesting the stock's price may be running ahead of its expected growth, at least by this rough measure.

Compare that to a stock with the same 25 P/E but 25% expected growth: its PEG would be 1.00, right at the traditional fair-value benchmark, illustrating how the same P/E can look very different once growth is factored in.

PEG is a useful sanity check, not a precise valuation tool. It relies entirely on a growth estimate that may not pan out, treats all growth as equally valuable regardless of its quality or durability, and doesn't account for differences in risk, profit margins, or capital intensity between companies.

PEG Ratio Calculator glossary

PEG Ratio: The P/E ratio divided by the expected annual earnings growth rate (as a plain number), a rough gauge of whether a valuation is justified by growth.
Earnings Growth Rate: The expected annual percentage growth in a company's earnings per share, commonly an analyst consensus estimate over the next few years.

PEG Ratio Calculator FAQs

Where does the growth rate come from?+

Analyst consensus estimates for forward earnings growth are the most common source, often available on financial data sites. You can also use your own estimate, historical growth rates, or a company's own guidance, though the PEG ratio is only as reliable as the growth number you put into it.

What counts as a good PEG ratio?+

A PEG near or below 1 is the traditional rule of thumb for a fairly or attractively valued stock relative to its growth, while a PEG well above 1 or 2 suggests the price may be running ahead of growth expectations. Like the P/E ratio itself, context (industry, company quality, growth durability) matters more than a single hard cutoff.

Why can PEG be misleading for some companies?+

PEG treats a dollar of growth the same regardless of quality or risk. A company growing quickly through heavy debt or one-time gains isn't necessarily comparable to one growing steadily from durable competitive advantages, even at the same PEG ratio.

What if the growth rate is negative?+

The calculator will flag it. A negative growth rate makes the PEG ratio's usual interpretation meaningless (a shrinking-earnings company divided into a P/E doesn't produce a sensible "valuation relative to growth" figure), so other valuation approaches are more appropriate there.