PEG Ratio Calculator
peg• Enter the P/E ratio and earnings growth to get the PEG ratio. • PEG < 1 undervalued, 1–2 fair, > 2 overvalued — value adjusted for growth.
Price ÷ earnings per share (EPS)
Annual EPS growth rate
PEG ratio
0.75
Undervalued
PEG is below 1 — the price looks cheap relative to earnings growth. This is the zone Peter Lynch favored.
Undervalued
< 1
Fair
1 – 2
Overvalued
> 2
What is the PEG ratio?
PEG divides the P/E ratio by the earnings growth rate (%). A P/E alone can’t tell you whether a fast-growing company deserves its price; PEG folds growth into the picture so companies growing at different rates can be compared more fairly.
Formula: PEG = P/E ÷ earnings growth (%). If the P/E is 20 and earnings grow 20% a year, the PEG is 1.0. Legendary investor Peter Lynch treated a PEG of 1 as fair, below 1 as attractive, and above 2 as pricey. This tool marks PEG < 1 undervalued, 1–2 fair, and > 2 overvalued.
PEG is not a silver bullet. The result swings with which growth number you use (trailing vs. forecast), and it breaks down for companies with zero or negative growth and for cyclical, financial, or asset-heavy stocks. Use it as one signal alongside P/E, debt, and cash flow.
Frequently asked questions
What PEG counts as undervalued?
A PEG under 1 is the usual line, and this tool labels below 1 undervalued, 1–2 fair and above 2 overvalued. But that line comes from Peter Lynch picking growth stocks, not from any law of finance. It is most useful when you compare companies within the same industry.
Should I use trailing growth or forecast growth?
Both are used, and they give very different answers. A trailing three-to-five-year EPS growth rate is a confirmed number but guarantees nothing about the future, while analyst forecasts look ahead yet tend to lean optimistic. Try both and see how far the PEG moves.
Does a low PEG mean the stock is cheap?
Not necessarily. The whole result hinges on one estimate: change growth from 20% to 10% and the PEG doubles. An unusually low PEG can mean the market simply does not believe the growth rate that was plugged in, rather than that the stock is a bargain. Test the case for the growth number before you trust the ratio.
What about loss-making companies or negative growth?
PEG cannot judge them. With no earnings there is no P/E to begin with, and a growth rate of zero or below makes the division meaningless — which is why this calculator only returns a value when growth is above zero. Look at other measures such as price-to-book or revenue growth instead.
Does the benchmark differ by sector?
Yes. Software and platform companies with fast, steady growth often sit near a PEG of 1, while banks, insurers, refiners and shipbuilders swing with the cycle, so there is no single growth number to feed in and PEG fits them poorly. The same goes for asset-heavy businesses valued on their balance sheet. Set your reference level within one industry.
Should I look at P/E or PEG?
Both. P/E tells you what you pay for current earnings; PEG tells you whether that price is steep for the growth behind it. A high P/E can still produce a low PEG if profits are compounding fast enough. Either way these are reference figures only — this tool is not investment advice, and the final decision and its consequences are yours.