PEG Ratio Calculator

Calculate the PEG ratio

The PEG ratio, short for price/earnings-to-growth, refines the price-to-earnings ratio by accounting for how fast a company's earnings are growing. It is calculated by dividing the P/E ratio by the annual earnings growth rate, expressed as a number. A company with a P/E of twenty-five growing earnings at twenty percent a year has a PEG of one and a quarter. The insight is that a high P/E can be justified by high growth, so the PEG ratio compares the price you pay against the growth you get.

A PEG around one is often considered to represent fair value, balancing price and growth.

Reading the PEG ratio

The PEG ratio was popularised as a way to find reasonably priced growth stocks. A PEG below one may indicate a stock that is cheap relative to its growth prospects, while a PEG well above one suggests you are paying a lot for each unit of growth. It is especially useful for comparing fast-growing companies that look expensive on P/E alone but may be justified once growth is factored in.

The ratio depends heavily on the growth estimate, which is inherently uncertain, so a PEG built on optimistic forecasts can be misleading. Use realistic growth figures and treat PEG as one input among several. All calculation happens locally in your browser.

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