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PEG Ratio Calculator

Calculate Price/Earnings to Growth ratio.

PEG Ratio Calculator

Current P/E ratio of the stock

Expected annual earnings growth rate

Results

PEG Ratio

Valuation Status

Investment Recommendation

Enter values to calculate PEG ratio

Formula & Understanding

PEG Ratio Formula

PEG Ratio = P/E Ratio ÷ Annual Earnings Growth Rate

< 1.0
Undervalued
Stock may be trading below fair value
= 1.0
Fairly Valued
Stock is trading at fair value
> 1.0
Overvalued
Stock may be trading above fair value

Key Points

Advantages

  • Considers both valuation and growth
  • Helps compare growth stocks
  • Simple and widely used metric
  • Useful for screening stocks

Limitations

  • Based on projected growth rates
  • Doesn't work for zero/negative growth
  • Growth estimates may be inaccurate
  • Doesn't consider dividend yield

Usage Tips

Compare Similar Companies: PEG ratios are most useful when comparing companies in the same industry or sector.
Consider Time Horizons: Use 3-5 year growth estimates rather than short-term projections for better accuracy.
Verify Growth Assumptions: Always validate the growth rate assumptions with company fundamentals and industry trends.
Use as Screening Tool: PEG ratio is best used as an initial screening tool, not as a sole investment decision criterion.

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