— Stock Market
PEG Ratio Calculator
Calculate the PEG ratio by dividing P/E by earnings growth. Enter P/E or price and EPS, add growth rate and optional dividend yield for PEGY, then test how sensitive the valuation is to growth assumptions.
PEG ratio
1.33
- P/E ratio
- 20
- Earnings growth
- 15%
Try: P/E 20, growth 15%, A bargain: P/E 12, growth 20%, PEGY with a 4% yield, From price $100, EPS $5
— PEG sensitivity to the growth rate
| Growth % | PEG |
|---|---|
| 7.5% | 2.67 |
| 9.38% | 2.13 |
| 11.25% | 1.78 |
| 13.13% | 1.52 |
| 15% | 1.33 |
| 16.88% | 1.19 |
| 18.75% | 1.07 |
| 20.63% | 0.97 |
| 22.5% | 0.89 |
— PEG vs the growth assumption
Download— How it works
PEG = P/E ÷ earnings growth rate (in %). PEGY = P/E ÷ (growth rate % + dividend yield %). The P/E can be entered directly or derived as price ÷ EPS.
Why P/E alone misleads
The price/earnings ratio tells you how much you pay per dollar of earnings, but not what those earnings are doing. A P/E of 30 is expensive for a company growing 5% a year and cheap for one growing 40%. Peter Lynch popularized the fix: divide the P/E by the growth rate. The PEG puts the price in the context of the growth you’re buying, so a richly-valued fast grower and a cheap slow one become directly comparable. The rule of thumb is that a PEG around 1 is fair value.
Worked example — a P/E of 20 and 15% earnings growth: PEG = 20 ÷ 15 = 1.33. Above 1, so the price is running a little ahead of the growth. A second stock at a P/E of 12 growing 20% scores 0.6 — much better value for its growth.
PEGY — crediting the dividend
The plain PEG ignores dividends, which penalizes mature companies that return cash rather than reinvesting every dollar into growth. The PEGY ratio fixes this by adding the dividend yield to the growth rate in the denominator: P/E ÷ (growth + yield). A utility growing earnings 5% but yielding 4% has a total “growth” of 9% for the PEGY, a fairer reflection of the return on offer. Enter a yield and the calculator shows both ratios side by side.
The growth rate is everything
The PEG lives or dies by the growth rate you feed it — and that’s an estimate of the future, the slipperiest input in finance. The sensitivity table shows the PEG across a range of growth rates around your figure, and the chart plots the curve: because PEG divides by growth, a small change in the assumption swings the answer noticeably. Use a realistic, sustainable multi-year growth rate rather than one stellar year, keep the P/E and growth on the same trailing-or-forward basis, and treat a PEG below 1 as a prompt to look closer, not a verdict. Not investment advice.
— Reader questions
How do I calculate the PEG ratio?
Divide the P/E ratio by the expected earnings growth rate (as a number, not a decimal). A P/E of 20 and 15% growth gives a PEG of 20 ÷ 15 = 1.33. You can enter the P/E directly or let the calculator derive it from price ÷ EPS.
What is a good PEG ratio?
The classic guide is that a PEG below 1 suggests the stock may be undervalued for its growth, around 1 is fair value, and above 1 is relatively expensive. It’s a rule of thumb, not a hard line — context and the reliability of the growth estimate matter.
What is the PEGY ratio?
A version that adds the dividend yield to the growth rate: P/E ÷ (growth + yield). It’s fairer to dividend-paying companies, whose shareholder return includes the dividend, not just earnings growth.
Should I use trailing or forward figures?
Either works, as long as the P/E and the growth rate are on the same basis. A forward P/E pairs with expected growth; a trailing P/E with historical growth. Mixing them — a trailing P/E with forecast growth — distorts the ratio.
Why is the PEG so sensitive to the growth rate?
Because growth is the denominator: PEG = P/E ÷ growth. A change from 15% to 12% growth raises the PEG by a quarter. Since growth is a forecast, a PEG is only as reliable as that estimate — which is why the sensitivity table matters.