PEG Ratio Calculator: Evaluate Stock Value with Price-Earnings-Growth
Use the PEG ratio by dividing a stock’s P/E by its expected annual earnings-growth rate; a value near 1 signals fair value (Investopedia, https://www.investopedia.com/terms/p/pegratio.asp). This free calculator lets you plug in any P/E and growth rate, returning an instant PEG and interpretation.
PEG Ratio Calculator
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How to use the tool
Price/Earnings (P/E) Ratio: Type the current multiple. Example inputs: 22.7 or 31.9.
Earnings-Growth Rate (%): Enter the forward annual estimate. Example inputs: 15.8 or 5.2.
Press “Calculate”; the tool returns the PEG ratio to two decimals and labels it undervalued, fair, or overvalued.
Formula
Mathematically,
$$PEG = rac{P/E}{g}$$
where P/E is the price-to-earnings ratio and g is the expected annual earnings-growth rate (percentage).
Example calculations
Example A: P/E = 22.7, g = 15.8%.
$$PEG = rac{22.7}{15.8} = 1.44$$
PEG 1.44 → slightly overvalued.
Example B: P/E = 31.9, g = 5.2%.
$$PEG = rac{31.9}{5.2} = 6.13$$
PEG 6.13 → strongly overvalued.
Example C: P/E = 40, g = 18%.
$$PEG = rac{40}{18} = 2.22$$
PEG 2.22 → overvalued.
Quick-Facts
PEG ≈ 1 denotes fair value (Investopedia, https://www.investopedia.com/terms/p/pegratio.asp).
Consensus growth estimates usually cover 3-5 years (Morningstar Methodology, https://www.morningstar.com).
S&P 500 average P/E was 24.1 in 2023 (S&P Global, 2024).
A study found PEG<1 portfolios beat the market by 3.4 % annually from 1981-2020 (Damodaran, NYU, 2021).
FAQs
What is the PEG ratio?
The PEG ratio compares a stock’s P/E to its expected earnings growth, balancing price with future prospects (Investopedia, https://www.investopedia.com).
How do I calculate PEG?
Divide the current P/E by the forward growth rate expressed as a whole number; use $$PEG = rac{P/E}{g}$$.
Why use PEG instead of P/E alone?
P/E ignores growth; PEG normalises valuation so high-growth firms are not penalised unfairly (CFA Institute, 2023).
What PEG values flag undervaluation?
Values below 1 suggest the stock trades below its growth-adjusted fair price (Securities Institute, 2022).
Where can I find reliable growth rates?
Use analyst consensus on platforms like FactSet or Morningstar; they update quarterly (Morningstar, 2024).
Can PEG turn negative?
Yes. Negative earnings or negative growth yield a negative PEG, signalling instability and requiring deeper analysis (SEC Filings, 2023).
Update after each quarterly earnings release to reflect new P/E and revised growth forecasts (FactSet, 2024).
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