PEG Ratio Calculator
The PEG Ratio Calculator refines the P/E ratio by factoring in expected earnings growth. Enter the P/E ratio and the annual EPS growth rate to get the PEG ratio.
Formula
PEG Ratio = P/E Ratio ÷ Annual EPS Growth Rate (%)
- A PEG near 1.0 suggests the price fairly reflects growth.
- Below 1.0 may indicate an undervalued growth stock; above 1.5 may indicate overvaluation.
P/E of 20 with 15% growth
Inputs
- P/E Ratio: 20
- Annual EPS Growth Rate: 15 %
20 ÷ 15 = 1.33, slightly above fair value on a growth-adjusted basis.
Frequently asked questions
Why use PEG instead of P/E?
P/E ignores growth. PEG divides P/E by the growth rate so fast-growing companies can be compared fairly with slower ones.