PEG Ratio Calculator
A 60× P/E can be cheaper than a 15× P/E — if the first company grows earnings at 40% and the second at 5%. The PEG ratio formalises that intuition: P/E divided by the earnings growth rate. Around 1, price and growth are balanced; well below 1 hints at growth going cheap; far above it, you're paying for growth that must materialise.
Enter the P/E (or price and EPS) and the expected annual EPS growth. Popularised by Peter Lynch, PEG is the fastest first-pass filter for 'growth at a reasonable price'.
How it works
- PEG = P/E ÷ expected annual EPS growth (as a plain number: 25% growth → 25).
- Use a multi-year forward growth estimate (3–5 years), not one bumper year.
- Interpretation bands shown: <1 potentially undervalued vs growth, ~1 fair, >2 expensive vs growth.
Frequently asked questions
What growth number should I divide by?
A sustainable multi-year EPS growth estimate — the 3–5 year expected CAGR, not last year's low-base rebound or a single guidance quarter. Using cyclical-peak growth is the classic way PEG lies: the P/E is real, the g is temporary.
Is PEG under 1 a buy signal?
It is a look-closer signal. PEG ignores balance sheet, cash conversion, moat durability and the QUALITY of growth — a lender growing 30% by loosening credit deserves a discount PEG. Lynch used it to rank ideas for further work, which is exactly the right altitude.
When does PEG break down?
Negative or near-zero growth (division explodes), loss-makers (no meaningful P/E), deep cyclicals (E and g both mislead at extremes), and very high-quality compounders whose durability justifies PEG > 2. It's a growth-stock tool; don't force it onto everything.
PEG or plain P/E — which should I use?
P/E answers 'what am I paying per rupee of current earnings'; PEG asks 'per rupee of GROWING earnings'. Use P/E for mature/stable businesses and cross-sector sanity checks, PEG when comparing growth stocks against each other. Neither replaces reading how durable the E and the g actually are.
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This tool is an educational estimate, not investment or tax advice. Rates and rules change — verify current figures and consult a professional before acting.