About the PEG Ratio Calculator
This PEG ratio calculator divides a stock’s price-to-earnings ratio by its expected annual earnings growth rate to show how much you are paying for each point of growth. Enter the share price and earnings per share — or the P/E directly — along with the expected EPS growth rate, and it returns the P/E, the PEG ratio, the dividend-adjusted PEGY ratio and a plain-English reading.
The PEG ratio was popularized by Peter Lynch, who suggested that a fairly priced company’s P/E roughly equals its growth rate, giving a PEG near 1. It lets you compare a fast grower on a high P/E with a slower company on a low P/E on a more equal footing, which plain P/E cannot do.
Use consistent inputs: a trailing P/E with a historical growth rate, or a forward P/E with analysts’ forecast growth (often the five-year expected EPS growth). Growth is entered as a whole-number percentage, so 15% growth is 15. PEG is not meaningful when earnings or growth are zero or negative, and it ignores balance-sheet strength and the reliability of the growth forecast.
With the default inputs, the peg ratio is 1.5. Change any value above to recalculate instantly.
How to use the peg ratio calculator
- 1Choose whether to enter price and EPS or the P/E ratio directly.
- 2Enter the share price and earnings per share, or the P/E.
- 3Enter the expected annual EPS growth rate, typically a 3–5 year analyst estimate.
- 4Add the dividend yield to see the PEGY ratio.
- 5Read the PEG — around 1 is fair, below 1 cheap, above 2 expensive — and compare with peers.
Formula and method
First the price-to-earnings ratio is found by dividing the share price by earnings per share (or you can enter the P/E directly). The PEG ratio then divides the P/E by the expected annual EPS growth rate g, expressed as a whole number — 20% growth is entered as 20, not 0.20.
The PEGY ratio adds the dividend yield to the growth rate, crediting companies that return cash to shareholders rather than reinvesting all earnings, which makes it fairer for mature dividend payers. A PEG of 1 means the P/E equals the growth rate; below 1 is traditionally seen as attractive and above 2 as expensive, although fair levels vary by sector and interest rates.
- P/E
- Price-to-earnings ratio
- EPS
- Earnings per share (trailing or forward)
- g
- Expected annual EPS growth rate, as a whole-number percent
Worked examples
Growth stock at $180 with $6 EPS
A $180 share price on $6 of earnings is a P/E of 30. With 20% expected growth, PEG = 30 ÷ 20 = 1.5 — a premium to growth. Adding the 1% dividend yield gives PEGY = 30 ÷ 21 ≈ 1.43.
Value stock entered by P/E
A P/E of 12 with 15% expected growth gives PEG = 12 ÷ 15 = 0.8. By Lynch’s rule of thumb the stock looks cheap relative to its growth, provided the growth estimate holds up.
Mature dividend payer
At $50 with $2.50 EPS the P/E is 20, and 8% growth gives a PEG of 2.5, which looks expensive. But a 4% dividend yield is part of the return: PEGY = 20 ÷ (8 + 4) ≈ 1.67, a far less stretched valuation.
Frequently asked questions
What is a good PEG ratio?+
A PEG ratio around 1 is traditionally considered fair value, below 1 potentially undervalued and above 2 expensive. Fair levels differ by industry and interest-rate environment, so compare a company with its peers and its own history rather than relying on a single cutoff.
Which growth rate should I use for PEG?+
Most analysts use the expected five-year annual EPS growth rate from consensus estimates with a forward P/E. You can also use historical growth with a trailing P/E. Stay consistent across the companies you compare, since mixing forward and trailing figures distorts the ratio.
Can the PEG ratio be negative?+
It can be calculated as negative if earnings or expected growth are negative, but the result is not meaningful. A negative PEG does not mean a stock is cheap; it means the ratio does not apply, so use other measures such as price-to-sales.
What is the PEGY ratio?+
PEGY divides the P/E by the sum of the earnings growth rate and the dividend yield. It gives credit for dividends, which are part of total return, so slow-growing companies with high yields are not unfairly penalized compared with the plain PEG.
Who invented the PEG ratio?+
The idea is usually credited to Mario Farina in his 1969 book, but it was popularized by Fidelity Magellan manager Peter Lynch in One Up on Wall Street (1989), who wrote that the P/E of a fairly priced company equals its growth rate.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.