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PEG Ratio Calculator
Is that PE ratio justified by earnings growth? Enter any ticker to see the growth-adjusted PEG ratio with a clear verdict — undervalued, fair, or overvalued — plus the implied fair value at PEG = 1.0.
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Load a ticker or enter values manually to see PEG ratio analysis.
How to use this PEG calculator
Load a ticker
Enter any US-listed symbol to auto-fill EPS, price, and the analyst consensus earnings growth rate. The calculator uses trailing twelve months (TTM) EPS and the best available growth estimate from Yahoo Finance data.
Read the PEG verdict
PEG below 1.0 = potentially undervalued. Between 1.0 and 1.5 = fair value. Above 2.0 = you're paying a steep premium. The color-coded badge gives you the answer at a glance — but always check the growth assumption behind it.
Check implied fair value
The calculator shows what the stock would be worth if PEG equaled exactly 1.0 — that's the price where the PE multiple equals the growth rate. The margin vs current price tells you how far above or below that benchmark the stock trades.
Use manual entry for custom estimates
Don't trust the default growth estimate? Switch to Manual Entry and plug in your own EPS, growth rate, and price. This is useful when you have a proprietary earnings model or want to stress-test different growth scenarios.
Understanding the PEG ratio
What is the PEG ratio?
The PEG ratio — price/earnings to growth — adjusts the traditional P/E ratio for earnings growth. It was popularized by Peter Lynch, who ran Fidelity's Magellan fund to 29% annual returns over 13 years. His rule of thumb: a fairly valued company has a PEG of about 1.0, meaning you're paying $1 of P/E for every 1% of annual earnings growth.
The formula is simple: PEG = P/E ÷ Annual EPS Growth Rate. A company with a 30× P/E growing earnings at 30% per year has a PEG of 1.0 — the high multiple is fully justified by high growth. The same 30× P/E on 10% growth gives a PEG of 3.0 — a red flag that the market may be overpricing the growth story.
PEG formula and interpretation
PEG = (Price ÷ EPS) ÷ EPS Growth Rate. Most practitioners use trailing P/E and forward-looking growth estimates (typically 3–5 year analyst consensus). The result maps to a simple scale: below 1.0 suggests the stock may be undervalued, 1.0–1.5 is fair value territory, 1.5–2.0 is getting expensive, and above 2.0 means you need very strong conviction in the growth outlook.
The implied fair value at PEG=1 works backward: if PEG should be 1.0, then the fair P/E equals the growth rate. Multiply that fair P/E by EPS to get the fair price. If a stock earns $5 and grows at 20%, the PEG=1 fair value is $5 × 20 = $100.
PEG vs PE: when to use which
P/E alone is misleading when comparing companies with different growth rates. A 40× P/E tech stock growing at 35% is actually cheaper than a 15× P/E utility growing at 3% — on a PEG basis, the tech stock is 1.14 and the utility is 5.0. PEG normalizes for growth, making cross-sector comparisons more meaningful.
But P/E is better for stable, low-growth businesses where PEG values become extreme. A dividend aristocrat with a 15× P/E and 4% growth shows a PEG of 3.75, but 15× isn't expensive for a reliable compounder. Use PEG for growth stocks, P/E for mature companies, and both for anything in between.
The growth estimate problem
PEG is only as good as the growth number you feed it. Analyst consensus estimates are systematically optimistic — they overestimate earnings growth by 5–10% on average. Backward-looking growth (last 5 years) can be even more misleading if the company is decelerating. The safest approach: use conservative growth estimates and require a PEG well below 1.0 as your margin of safety.
For the most reliable PEG, use the company's 5-year expected growth rate from a consensus of analysts, not a single estimate. Cross-check against the actual EPS growth over the last 3–5 years — if estimates are dramatically higher than historical growth, dig into why before trusting the PEG.
Frequently asked questions
What is a good PEG ratio?
A PEG below 1.0 suggests potential undervaluation — the PE is lower than the growth rate justifies. Between 1.0 and 1.5 is fair. Above 2.0 is expensive. Peter Lynch considered PEG < 1.0 a potential bargain, but always verify the growth estimate is realistic.
How is the PEG ratio calculated?
PEG = P/E Ratio ÷ Annual EPS Growth Rate. A stock at 25× P/E with 20% expected earnings growth has a PEG of 1.25. Use trailing P/E and forward-looking growth estimates for the most meaningful result.
Is PEG ratio better than PE ratio?
For growth stocks, yes — PEG adjusts for growth expectations, making it easier to compare companies with different growth rates. For stable, low-growth companies, P/E is more reliable since PEG becomes extreme at low growth rates.
What does a PEG ratio below 1 mean?
It means the stock's P/E multiple is lower than its annual earnings growth rate. You're getting growth at a discount — paying less than $1 of PE per percentage point of growth. This was Peter Lynch's definition of a potential bargain.
What are the limitations of PEG ratio?
PEG breaks down with negative earnings, cyclical companies at peak margins, unreliable growth estimates, and very low growth (<5%) where it inflates to extreme values. It also ignores dividends, balance sheet quality, and cash flow sustainability.
How do I use PEG for growth stocks?
Compare PEG across similar companies in the same sector. Use forward growth estimates, not trailing. A PEG near 1.0 for a high-growth company means the market is pricing growth fairly — look for PEG below 0.8 for a genuine discount on quality growth.
What PEG ratio is considered overvalued?
Above 2.0 is generally overvalued — the market is pricing in more growth than the estimates justify. Between 1.5 and 2.0 is expensive but can be warranted for franchise-quality businesses with durable competitive moats.
Does PEG ratio vary by industry?
Yes. Technology and healthcare tend to have higher PEGs due to premium growth expectations. Financials and utilities run lower. Always compare PEG within the same sector — a 1.5 PEG in tech might be a bargain while the same in utilities is expensive.