PEG Ratio Calculator
PEG Ratio Calculator: Evaluate a Stock’s True Value
Investors often look at the Price-to-Earnings (P/E) Ratio to judge whether a stock is expensive or cheap. But P/E alone doesn’t account for growth. That’s where the Price/Earnings to Growth (PEG) Ratio comes in.
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The PEG ratio adjusts the P/E by the company’s expected growth rate, providing a clearer picture of valuation.
What is the PEG Ratio?
The PEG Ratio measures a stock’s P/E ratio relative to its EPS growth rate. It helps investors determine whether a stock is fairly priced, undervalued, or overvalued, taking future growth into account.
PEG Formula: PEG Ratio=P/E RatioEPS Growth Rate (%)\text{PEG Ratio} = \frac{\text{P/E Ratio}}{\text{EPS Growth Rate (\%)}} PEG Ratio=EPS Growth Rate (%)P/E Ratio
- P/E Ratio: Price divided by earnings per share.
- EPS Growth Rate: Expected annual growth in earnings per share, in %.
A lower PEG (<1) indicates the stock may be undervalued relative to its growth, while a higher PEG (>2) suggests overvaluation.
How to Use the PEG Calculator
- Enter the P/E Ratio.
- Enter the EPS Growth Rate (%).
- Click Calculate.
The calculator will display the PEG Ratio and a color-coded indicator:
| PEG Ratio | Interpretation | Indicator |
|---|---|---|
| < 1 | Undervalued: Stock may be a good buy | ✅ Green |
| 1 – 2 | Fairly valued: Price matches growth | ⚠️ Orange |
| > 2 | Overvalued: Stock may be expensive | ❌ Red |
Example:
- P/E = 20
- EPS Growth Rate = 25%
PEG=2025=0.8PEG = \frac{20}{25} = 0.8PEG=2520=0.8
✅ Undervalued: The stock may be a good investment.
Why PEG Matters
- For Investors: Helps identify growth stocks that are undervalued.
- For Analysts: Provides a more complete picture than P/E alone.
- For Portfolio Decisions: Helps balance high-growth vs. high-price stocks.
The PEG ratio is a simple, yet powerful tool for evaluating whether a stock’s price is justified by its growth potential.
Key Takeaways
- PEG adjusts P/E for expected growth.
- PEG < 1: Potential bargain.
- PEG 1–2: Fairly valued.
- PEG > 2: Overvalued, may need caution.
- Combine PEG with other ratios like ROE and ROA for a full financial analysis.
Try the PEG Calculator Now
Use our PEG Ratio Calculator to quickly evaluate a stock’s valuation relative to its growth. Make smarter investment decisions by comparing price and growth together.
