PEG Ratio Calculator

PEG range	Read
Below 1.0	Undervalued — growth may not be fully priced in
1.0 – 2.0	Fairly valued — price and growth roughly balanced
Above 2.0	Overvalued — price has run ahead of growth

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Walk-through

How to Use This Calculator

3 steps

1

Enter the P/E ratio and expected growth rate

On the PEG Ratio tab, enter the stock's current price-to-earnings (P/E) ratio and its expected annual earnings growth rate — from analyst consensus or a historical average. The PEG ratio updates instantly.

2

Read the valuation verdict

The result card labels the PEG as undervalued (below 1), fairly valued (1 to 2), or overvalued (above 2) — Peter Lynch's classic rule of thumb. Switch to the Interpretation tab for a fuller plain-English read and the valuation-band table.

3

Solve for the implied P/E

Use the Solve for P/E tab to work backwards: enter a target PEG ratio (1.0 for "fair value") and an expected growth rate to see the P/E that would produce it — useful for checking whether a stock's current P/E is reasonable given its growth outlook.

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Reference

Formula & Methodology

2 formulas

PEG ratio

PEG Ratio = P/E Ratio / Annual Earnings Growth Rate (%)

PEG divides a stock's price-to-earnings ratio by its expected annual EPS growth rate, expressed as a whole number percentage (e.g. 12, not 0.12). It's a growth-adjusted valuation measure: two stocks with identical P/E ratios can have very different PEG ratios if their growth rates differ, and a high P/E can still be "cheap" if growth is fast enough to justify it. Growth rate must be greater than zero — at zero or negative growth, the ratio is undefined or misleading and the calculator flags it rather than returning a nonsensical value.

Solve for implied P/E

P/E Ratio = Target PEG Ratio × Annual Earnings Growth Rate (%)

Rearranging the PEG formula solves for the P/E ratio implied by a target PEG and a given growth rate — for example, at a 1.0 target PEG and 15% growth, the implied fair-value P/E is 15.

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YMYL

Trust, Methodology & Sources

Reviewed by Calculover Editorial Review · Updated 2026-07-26 · 2 sources

Editorial accountability

Author: Quinn Sumner - Editor

Owner: Quinn Sumner - Editorial owner

Reviewer: Calculover Editorial Review - Source and limitation review

Last reviewed: 2026-07-26

Last verified: 2026-07-26

Data effective: 2026-07-26

Methodology

PEG Ratio Calculator divides the user-supplied P/E ratio by the user-entered expected annual earnings growth rate. The Solve for P/E tab rearranges the same formula to solve for the P/E ratio implied by a target PEG and a growth rate.

Assumption: PEG Ratio Calculator relies entirely on user-entered P/E and growth-rate values and does not independently verify stock prices, EPS figures, or growth estimates.

Assumption: The growth-rate input is assumed to be a realistic annual EPS growth estimate, whether sourced from analyst consensus or historical averages — the calculator cannot validate the accuracy of that forecast.

Assumption: The under 1 / 1-2 / over 2 valuation bands follow Peter Lynch's popularized rule of thumb and are a rough heuristic, not a precise valuation threshold.

Limitations & guidance

PEG Ratio Calculator does not adjust for differences in risk, debt levels, capital intensity, or dividend policy between companies being compared.

PEG becomes undefined or misleading for companies with zero, negative, or highly volatile earnings growth, and the calculator flags rather than computes a ratio in that case.

Growth-rate forecasts carry meaningful uncertainty; a PEG calculated from an inaccurate growth estimate can be misleading regardless of how precisely the ratio itself is computed.

Professional guidance: PEG Ratio Calculator is for investing education only and is not investment, tax, or financial advice. Valuation decisions should be reviewed alongside complete financial analysis with a qualified financial professional.

Primary sources

Beginners' Guide to Financial Statements - U.S. Securities and Exchange Commission

Investing Basics - U.S. Securities and Exchange Commission

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Glossary

Key Terms Explained

6 terms

PEG ratio A stock's price-to-earnings (P/E) ratio divided by its expected annual earnings growth rate, used to judge whether a valuation is justified by growth. Popularized by investor Peter Lynch.

P/E ratio Price-to-earnings ratio: a stock's share price divided by its earnings per share (EPS). Measures how much investors are paying for each dollar of current earnings.

Earnings growth rate The expected (or historical) annual percentage growth in a company's earnings per share, commonly sourced from analyst consensus estimates or a trailing multi-year average.

Undervalued In PEG terms, a ratio below 1.0 — the stock's price may not fully reflect its expected earnings growth, a classic signal that the stock could be cheap relative to its growth prospects.

Overvalued In PEG terms, a ratio above 2.0 — the price has run well ahead of what the expected growth rate can justify, a signal the stock may be expensive.

Growth-adjusted valuation A valuation approach that normalizes a price multiple (like P/E) by a growth rate, allowing comparison between fast-growing and slow-growing companies on a more even footing than P/E alone provides.

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Scenarios

Real-World Examples

3 worked examples

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Growth-stock investor

Growth stock near fair value

P/E Ratio 30 Earnings Growth Rate 30%

30 ÷ 30 = a PEG of 1.0 — right at Peter Lynch's classic fair-value mark. The higher P/E is fully justified by an equally high expected growth rate, so the stock isn't obviously cheap or expensive on this measure alone.

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Value investor

Low P/E, low growth — value trap check

P/E Ratio 10 Earnings Growth Rate 4%

10 ÷ 4 = a PEG of 2.5 — overvalued by the rule of thumb, despite the low headline P/E. A cheap-looking P/E can still carry a high PEG if the growth rate backing it up is weak; this is a common "value trap" pattern worth digging into further before assuming the stock is a bargain.

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Skeptical investor

High P/E, low growth — overvalued

P/E Ratio 45 Earnings Growth Rate 8%

45 ÷ 8 = a PEG of 5.6 — well above the overvalued threshold. The market is pricing in far more growth than the current 8% estimate supports, so either growth needs to accelerate substantially or the stock's price looks stretched relative to its fundamentals.

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Deep Dive

Understanding the PEG Ratio Calculator

3 chapters · 4 min read

The price/earnings-to-growth (PEG) ratio takes the widely used P/E ratio one step further by dividing it by the company's expected earnings growth rate. Popularized by legendary fund manager Peter Lynch, PEG lets investors compare valuations across companies with very different growth profiles — a high P/E paired with high growth can be perfectly reasonable, while a low P/E paired with low growth can actually be expensive. This calculator computes PEG from your P/E and growth-rate inputs, gives you an instant under/fair/overvalued read, and can also solve backwards for the P/E a target PEG implies.

How the PEG Ratio Calculator works

PEG is calculated as the P/E ratio divided by the expected annual earnings growth rate, entered as a whole-number percentage (12 for 12%, not 0.12). The result is a single number that's typically read against three bands: below 1.0 suggests the stock may be undervalued relative to its growth, 1.0 to 2.0 suggests a fair valuation, and above 2.0 suggests the price has outrun what the growth rate can justify.

The Solve for P/E tab rearranges the same formula — P/E = target PEG × growth rate — so you can check what P/E a given growth rate would need to support a specific PEG target, such as Peter Lynch's classic "fair value" mark of 1.0.

Inputs and what they mean

P/E ratio is the stock's current price-to-earnings multiple — you can calculate it separately with the P/E Ratio Calculator if you only have price and EPS. Earnings growth rate should reflect a realistic expectation for annual EPS growth, commonly sourced from analyst consensus estimates (for a forward-looking PEG) or a trailing 3-5 year historical average (for a backward-looking PEG) — be consistent about which one you're using, since mixing a forward P/E with a historical growth rate (or vice versa) can distort the result.

Limits and edge cases

PEG is undefined when the growth rate is zero or negative — dividing by zero or flipping the sign produces a meaningless or misleading ratio, so the calculator flags this instead of returning an error value. PEG also breaks down for very high-growth or cyclical companies: a temporarily depressed growth estimate (or an unusually high one from a low earnings base) can distort the ratio in either direction. PEG works best as a rough screening tool for comparing similarly-sized, similarly-mature companies within the same industry — it isn't a substitute for a full discounted cash flow or comparable-company analysis, and growth-rate estimates themselves carry meaningful forecast error.

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Questions

Frequently Asked Questions

6 questions

What is the formula for the PEG ratio?+

PEG ratio equals the P/E ratio divided by the expected annual earnings growth rate, entered as a percentage: PEG = P/E ÷ Growth Rate. For example, a stock with a P/E of 20 and 10% expected growth has a PEG of 2.0.

What does a PEG ratio below 1 mean?+

A PEG below 1.0 is generally read as a signal the stock may be undervalued relative to its expected earnings growth — the market may not be fully pricing in the growth the company is expected to deliver. It's a rule of thumb, not a guarantee, and should be checked against other valuation measures.

What does a PEG ratio above 2 mean?+

A PEG above 2.0 is typically read as overvalued — the stock's price has run ahead of what its expected growth rate can justify. This can happen with hype-driven stocks, or with companies whose growth estimates have recently been cut without the price adjusting yet.

What are the limitations of the PEG ratio?+

PEG assumes the growth-rate estimate is accurate, which is rarely certain — analyst forecasts and historical averages can both be wrong. It also doesn't account for differences in risk, debt levels, capital intensity, or dividend policy between companies, and it becomes unreliable or undefined for companies with zero, negative, or extremely volatile earnings growth.

Where should the earnings growth rate come from?+

Common sources are forward-looking analyst consensus estimates for next year's EPS growth, or a trailing 3-5 year historical average annual EPS growth rate. Be consistent: pairing a forward P/E with a historical growth rate (or vice versa) can distort the PEG ratio.

Who popularized the PEG ratio?+

Fund manager Peter Lynch popularized the PEG ratio in his investing books, using a PEG near 1.0 as a rough "fair value" heuristic — the idea being that a fairly priced company's P/E ratio should roughly equal its growth rate.

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Valuation Inputs

PEG Ratio

PEG Ratio Bands

Your Read

Solve for P/E

Implied P/E Ratio

How to Use This Calculator

Enter the P/E ratio and expected growth rate

Read the valuation verdict

Solve for the implied P/E

Formula & Methodology

Trust, Methodology & Sources

Key Terms Explained

Real-World Examples

Growth-stock investor

Value investor

Skeptical investor

Understanding the PEG Ratio Calculator

How the PEG Ratio Calculator works

Inputs and what they mean

Limits and edge cases

Frequently Asked Questions

Get a branded PDF of your results

📋 Valuation Inputs

📊 PEG Ratio

🧭 PEG Ratio Bands

💬 Your Read

🎯 Solve for P/E

📊 Implied P/E Ratio

How to Use This Calculator

Enter the P/E ratio and expected growth rate

Read the valuation verdict

Solve for the implied P/E

Formula & Methodology

Trust, Methodology & Sources

Key Terms Explained

Real-World Examples

Understanding the PEG Ratio Calculator

How the PEG Ratio Calculator works

Inputs and what they mean

Limits and edge cases

Frequently Asked Questions

Get a branded PDF of your results

Keep Exploring

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Guides & articles

Valuation Inputs

PEG Ratio

PEG Ratio Bands

Your Read

Solve for P/E

Implied P/E Ratio