Popularised by Peter Lynch, the PEG ratio adjusts the P/E for growth: a PEG of 1 suggests a fairly valued growth stock, below 1 potentially undervalued, above 2 expensive. It depends heavily on the growth estimate.
How to use the PEG Ratio Calculator
- Price per share
- Earnings per share
- Growth estimate
- Expected annual EPS growth
- Return on equity
- Retention rate
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the share price and EPS (or the P/E), and the expected growth rate or ROE and retention rate.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| Price per share | Amount in your currency |
| Earnings per share | Amount in your currency |
| Growth estimate | Choose one: Enter expected EPS growth, Calculate from ROE × retention |
| Expected annual EPS growth | In % |
| Return on equity | In % |
| Retention rate | In % |
What each result means
- P/E ratio = [Price per share]÷[Earnings per share]
- PEG ratio = [P÷E ratio]÷[Earnings growth used]
Example values
How the main result changes when Price per share changes and everything else stays at the example values above:
| Price per share | PEG ratio |
|---|---|
| 45 | 0.67 |
| 67.5 | 1 |
| 90 | 1.33 |
| 112.5 | 1.67 |
| 135 | 2 |
| 180 | 2.67 |
Formula
P/E = price ÷ EPSGrowth = expected EPS growth, or ROE × retention ratePEG = P/E ÷ growth rate (%)Worked example
Inputs — Price per share: $90; Earnings per share: $4.5; Growth estimate: Enter expected EPS growth; Expected annual EPS growth: 15 %; Return on equity: 18 %; Retention rate: 70 %.
Results — P/E ratio = 20; Earnings growth used = 15 %; PEG ratio = 1.33; Rule of thumb = Fairly valued (1–2).
Frequently asked questions
What is a good PEG ratio?
Below 1 is often considered attractive.
Which growth rate should I use?
The expected annual EPS growth over the next 3–5 years.
What are the PEG ratio's weaknesses?
It relies on uncertain growth forecasts and ignores dividends.
What formula does the PEG Ratio Calculator use?
P/E = price ÷ EPS.