Valuation benchmark · 11 sectors
PEG Ratio by Industry: Sector Benchmarks
The PEG ratio adjusts the P/E multiple for earnings growth — a P/E of 30 with 30% growth is a PEG of 1.0 (fair value), while a P/E of 15 with 5% growth is a PEG of 3.0 (expensive on a growth-adjusted basis). Sector benchmarks matter because growth expectations differ fundamentally: Technology and Healthcare naturally carry higher PEGs than Energy or Financials. Use the PEG Ratio Calculator to compute it for any ticker, then compare it to the sector median below.
2025 data · 11 sectors
PEG Ratio Benchmarks by Sector
| Sector | Median PEG | Typical Range | Notes |
|---|---|---|---|
| Technology | 1.8 | 0.9–3.5 | High-growth SaaS commands 2–3x; mature software at 1.0–1.5; hardware and semis at 0.8–1.4 |
| Healthcare | 2.1 | 1.2–4.0 | Biotech pipelines trade at speculative premiums; large pharma at 1.5–2.5; medical devices at 2.0–3.5 |
| Consumer Discretionary | 1.6 | 0.8–3.0 | E-commerce leaders 2–3x; auto OEMs and traditional retail below 1.0 on cyclicality |
| Industrials | 1.5 | 0.8–2.5 | Defense and aerospace at 1.5–2.5; short-cycle manufacturers at 0.8–1.5 |
| Communication Services | 1.4 | 0.6–2.5 | Streaming and ad platforms 1.5–2.5; legacy telecom at 0.6–1.0 with low growth |
| Financials | 1.2 | 0.7–2.0 | Regional banks at 0.7–1.2; fintech at 1.5–3.0; insurance at 1.0–1.5 |
| Consumer Staples | 2.8 | 1.5–4.5 | Low growth inflates PEG; premium CPG and branded food at 2.5–4.0 |
| Materials | 1.4 | 0.6–2.2 | Specialty chemicals 1.5–2.0; commodity metals 0.6–1.0 on cyclical earnings |
| Real Estate (REITs) | 3.5 | 1.5–7.0 | PEG less meaningful (earnings replaced by FFO); use with caution |
| Energy | 0.9 | 0.3–2.0 | Commodity-earnings cyclicality makes PEG volatile; integrated majors at 0.8–1.5 |
| Utilities | 3.2 | 2.0–5.5 | Slow, regulated growth inflates PEG; consistency is valued over growth rate |
What Is a Good PEG Ratio?
The PEG ratio was popularized by Peter Lynch as a growth-adjusted valuation shortcut. It divides the P/E ratio by the earnings growth rate, putting fast-growing and slow-growing companies on a comparable footing. A PEG of 1.0 implies the market is pricing in exactly the expected growth rate — no premium, no discount. Below 1.0, the stock appears cheap relative to its growth. Above 2.0, investors are paying a significant premium for continued growth.
Below 1.0 — Potential value. The stock may be undervalued relative to its growth rate. Common in cyclical sectors (Energy, Materials) where elevated near-term earnings suppress the P/E, or in out-of-favor sectors. Requires earnings quality checks — cyclical earnings peaks can make a stock look cheap when it is not.
1.0 to 2.0 — Growth at a reasonable price. This is the GARP zone. Technology companies, Industrials, and most mid-cap growth stocks fall here when fairly priced. A PEG in this range suggests the market is giving credit for growth without paying a speculative premium.
Above 2.0 — Growth premium. The market expects above-average growth to continue. Normal for Consumer Staples, Utilities, and Biotech — where stability or pipeline optionality commands a premium. For cyclical or mature businesses, a PEG above 2.0 warrants scrutiny.
Always compare a company's PEG to its sector benchmark above. A Utility at 3.2 is operating right at the sector median; a Materials company at 3.2 deserves investigation.
How to Use This Data
1. Use forward growth rates, not trailing
PEG is most useful when calculated with forward EPS growth estimates (next 12–24 months) rather than trailing figures. Trailing EPS can reflect one-time items or cyclical peaks that distort the ratio. Analyst consensus growth estimates, while imperfect, are the standard input. Use the PEG ratio calculator to compute the forward PEG for any ticker automatically.
2. Watch for distorted PEGs in cyclical sectors
Energy and Materials companies frequently show PEGs below 1.0 at commodity cycle peaks because earnings are temporarily elevated. This is not a value signal — it is a cyclicality artifact. When analyzing these sectors, supplement the PEG with EV/EBITDA and through-the-cycle earnings estimates. A PEG screen alone will systematically mislead in sectors where earnings mean-revert.
3. Pair PEG with P/E and EV/EBITDA for a full picture
The PEG ratio normalizes for growth but ignores balance sheet leverage and non-cash charges. A company with high debt can have a depressed P/E (and thus a low PEG) that does not reflect the true cost of capital. Pair PEG with P/E benchmarks and EV/EBITDA benchmarks to triangulate valuation from multiple angles.
Common questions
PEG ratio by industry — answered directly.
What is a good PEG ratio?
A PEG ratio below 1.0 is traditionally considered undervalued — the stock is cheap relative to its earnings growth rate. A PEG near 1.0 signals fair value. Above 2.0, the market is pricing in a growth premium that demands continued outperformance to justify. However, sector context is essential: a PEG of 2.5 is normal for Consumer Staples and Utilities, but expensive for Energy or Financials. Always compare to the sector median in the table above rather than applying a universal threshold.
What does a PEG ratio below 1 mean?
A PEG below 1.0 suggests the stock may be undervalued relative to its earnings growth — the investor is paying less per unit of growth than a fairly priced stock would imply. However, this requires scrutiny. Cyclical sectors like Energy often show PEGs below 1.0 because near-term earnings are elevated by commodity prices, which are not sustainable. Before acting on a sub-1.0 PEG, verify earnings quality, the source of the growth rate (analyst estimate vs. trailing), and whether the earnings base is at a peak or trough.
How is PEG ratio different from P/E ratio?
The P/E ratio measures price relative to earnings but ignores how fast those earnings are growing. A tech company with a P/E of 40 looks expensive next to an industrial at P/E 15 — until you factor in that the tech company is growing earnings at 30% per year while the industrial grows at 5%. PEG normalizes for this by dividing P/E by the earnings growth rate: PEG = (P/E) ÷ (EPS Growth Rate). A P/E of 40 with 30% growth gives a PEG of 1.33; a P/E of 15 with 5% growth gives a PEG of 3.0. The slower grower is actually more expensive on a growth-adjusted basis.
Why do PEG ratios vary so much by sector?
PEG ratios are driven by both the P/E multiple and the earnings growth rate — and both vary dramatically by sector. High-growth sectors like Technology attract premium P/E multiples, but their fast earnings growth keeps the PEG moderate. Slow-growth sectors like Utilities and Consumer Staples carry lower P/E multiples but their near-zero growth rates cause PEG to inflate dramatically. Sectors with cyclical earnings (Energy, Materials) can show distorted PEG ratios at earnings peaks or troughs. Always compare within sectors, never across them.
Related Tools & Resources
PEG Ratio Calculator
Compute P/E ÷ earnings growth rate for any ticker and benchmark against the sector median above.
P/E Ratio by Industry
The unadjusted earnings multiple — compare it to PEG to understand how much of the P/E is justified by growth versus market sentiment.
EV/EBITDA by Industry
A capital-structure-neutral valuation multiple — pairs well with PEG to screen out companies where high debt is depressing the P/E and distorting the PEG.
P/S Ratio by Industry
The price-to-sales multiple — useful for pre-earnings or high-growth companies where P/E and PEG cannot be computed due to negligible or negative earnings.
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