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PEG Ratio (Price/Earnings-to-Growth) Calculator Formula Breakdown
Current market share price divided by Trailing Twelve Months (TTM) Diluted EPS.
3-5 year projected annual earnings per share compound growth rate.
A PEG of 1.0 represents fair value where P/E multiple perfectly matches the earnings growth rate.
How to Calculate PEG Ratio Step-by-Step
Gather real-time stock price and trailing twelve months Diluted Earnings Per Share (EPS).
Calculate standard Price-to-Earnings (P/E) multiple.
Input consensus 3-5 year projected EPS growth rate (or historical CAGR).
Divide the P/E ratio by the expected growth rate percentage to produce the PEG multiple.
Calculate Peter Lynch's Fair Value Target Price: EPS × Growth Rate.
How to Interpret the Result
Frequently Asked Questions
What is the PEG Ratio?
The PEG ratio adjusts a stock's P/E ratio by dividing it by its projected earnings growth rate, providing a more balanced comparison between high-growth and mature companies.
What is considered a good PEG ratio?
Peter Lynch considered a PEG ratio of 1.0 or lower to be an attractive buy signal, indicating that the stock's price is low relative to its earnings growth potential.
Why is PEG better than standard P/E?
A P/E of 30x might look expensive, but if the company is compounding earnings at 35% annually, its PEG is 0.86x—a bargain compared to a stagnant company with a 15x P/E growing at 3% (PEG = 5.0x).
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