Price/Earnings to Growth (PEG) Ratio Calculator

The Price/Earnings to Growth (PEG) ratio is a valuation metric that compares a stock’s price-to-earnings ratio with its expected earnings growth rate.

Our PEG ratio calculator provides a valuation signal to help you quickly estimate the PEG ratio and understand growth-adjusted stock valuation.

PEG Ratio Tutorial: Unlock High-Growth Value Stocks

How to Use the PEG Ratio Calculator

PEG was designed to improve on the basic P/E ratio. A company with a high P/E may not actually be expensive if its earnings are growing quickly. Likewise, a low P/E stock may not be cheap if growth is weak or declining. The PEG ratio helps investors judge valuation in the context of growth.

That makes it especially useful for comparing growth stocks, where a normal P/E ratio often looks high on the surface. Instead of asking only, “Is this stock expensive?” the PEG ratio asks, “Is this stock expensive relative to how fast earnings are expected to grow?”

Start by entering the stock’s current share price.

Next, enter earnings per share, or EPS. This can be trailing 12-month EPS if you are using historical earnings, or forward EPS if you prefer a forward-looking approach. The most important thing is to stay consistent in how you interpret the result.

Then enter the expected annual earnings growth rate as a whole percentage. For example, if you expect earnings to grow at 15% per year, enter 15, not 0.15.

You can also choose whether your growth estimate is based on:

• a forward/analyst estimate
• a historical growth rate

Once entered, the calculator shows:

• The P/E ratio
• The PEG ratio
• A valuation signal
• The growth basis used

The PEG ratio works best as a quick screening tool, especially when comparing growth stocks in the same sector or business type.

PEG Ratio Formula Explained

The calculation happens in two steps.

First, calculate the P/E ratio:

P/E Ratio = Share Price / EPS

Then divide the P/E ratio by the expected earnings growth rate:

PEG Ratio = P/E Ratio / Earnings Growth Rate

For example:

• Share price = $100
• EPS = $5
• P/E ratio = 20
• Expected growth rate = 15

Then:

PEG Ratio = 20 / 15 = 1.33

In general:

• A PEG ratio around 1.0 is often seen as roughly fair
• A value below 1.0 can suggest the stock is attractively priced relative to growth
• well above 1.0 can suggest the stock is more expensive relative to growth

This is not a strict rule, but it gives investors a simple growth-adjusted valuation benchmark.

PEG Ratio Worked Example

Assume a stock has:

• share price = $100
• EPS = $5
• expected earnings growth = 15%

First, calculate the P/E ratio:

P/E = 100 / 5 = 20

Now calculate the PEG ratio:

PEG = 20 / 15 = 1.33

That gives the stock a PEG ratio of 1.33.

This result suggests the stock is not obviously cheap relative to growth, but it is also not at an extreme level. It may be reasonably valued depending on the strength, reliability, and duration of that growth.

If the same stock had expected growth of 25% instead, the PEG would fall to:

20 / 25 = 0.80

That would make the stock look much more attractive on a growth-adjusted basis.

How to Interpret the Result

The PEG ratio is most useful when comparing valuation and growth together.

A low PEG ratio can suggest the market is not fully pricing in the company’s growth potential. That can make the stock interesting, especially if the growth is durable and realistic.

A PEG ratio around 1.0 is often treated as a rough fair-value zone. It suggests price and growth are more closely aligned.

A high PEG ratio can suggest the stock is expensive relative to expected growth. That does not automatically mean it is a bad investment, but it usually means the market is already pricing in a lot of optimism.

The most important limitation is that the PEG ratio depends heavily on the growth estimate. If the growth forecast is unrealistic, the PEG ratio becomes misleading. That is why the metric works best when:

• Growth estimates are credible
• Companies are compared within the same sector
• Earnings quality is strong
• The investor checks whether the business can realistically sustain that growth

The PEG ratio is a useful shortcut, but it should always be paired with broader analysis of profitability, competitive advantage, and balance sheet strength.