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Free PEG Ratio (Price/Earnings-to-Growth) Calculator

Calculate the PEG Ratio (Price/Earnings to Growth) popularized by legendary Magellan Fund manager Peter Lynch. Normalizes the standard P/E ratio by factoring in expected earnings per share (EPS) compound growth rate.

Formula:PEG Ratio = (Price / EPS) / Expected Annual EPS Growth Rate (%)
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PEG Ratio (Price/Earnings-to-Growth) Calculator Formula Breakdown

PEG Ratio = (Price / EPS) / Expected Annual EPS Growth Rate (%)
P/E Ratio

Current market share price divided by Trailing Twelve Months (TTM) Diluted EPS.

Expected EPS Growth Rate (%)

3-5 year projected annual earnings per share compound growth rate.

Peter Lynch Benchmark

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

1

Gather real-time stock price and trailing twelve months Diluted Earnings Per Share (EPS).

2

Calculate standard Price-to-Earnings (P/E) multiple.

3

Input consensus 3-5 year projected EPS growth rate (or historical CAGR).

4

Divide the P/E ratio by the expected growth rate percentage to produce the PEG multiple.

5

Calculate Peter Lynch's Fair Value Target Price: EPS × Growth Rate.

How to Interpret the Result

A PEG ratio below 1.0 indicates an undervalued growth stock (Peter Lynch's classic sweet spot). A PEG between 1.0 and 1.5 is fairly priced. A PEG exceeding 2.2 suggests high valuation vulnerability to any future growth slowdown.

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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