PEG ratio
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Calculator
PEG ratio calculator
Enter a P/E ratio, or the price and EPS to build one, and an expected annual EPS growth rate. The calculator returns the PEG and a small table showing what happens if growth comes in above or below your estimate.
P/E used
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Growth used
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The working
What PEG adds to a P/E
A P/E of 30 looks expensive next to a P/E of 12. Divide each by its expected growth rate and the picture can flip: 30 over 20% growth is a PEG of 1.5, while 12 over 4% growth is 3.0. The PEG ratio page works through why, and where the adjustment stops making sense.
The weak input
The P/E is a fact about today's price. The growth rate is an estimate about the future, and estimates miss. That is why the working below includes a sensitivity check: the same P/E against growth five points higher and five points lower. If your conclusion only survives at the top of that range, it depends on the estimate being right.
PEG also breaks for companies with low or negative growth. Divide by 1% growth and the ratio explodes; divide by a negative number and it turns negative, which reads as cheap when it means the opposite. For slow growers that pay a dividend, some investors add the dividend yield to growth before dividing. For fast growers with no profits, price-to-sales is usually the better starting point.
To build a screen around growth with a cap on what you pay, see how to set up a growth stock screen.
Related questions
Is a PEG ratio of 1 fair value?
A PEG near 1 is a rule of thumb popularized in books on growth investing. It has no theory behind it strong enough to treat as a line between cheap and expensive, and it ignores dividends, debt and how reliable the growth estimate is.
Which growth rate should I use?
Use the growth rate that matches the earnings in your P/E. A forward P/E pairs with expected growth in the next year or two. Many quote pages use a five-year estimated growth rate instead. Whichever you pick, write it down, because PEG values from different tools are often built on different horizons.