PEG Ratio Calculator

Calculate P/E ratio and PEG ratio based on share price, EPS, and expected annual earnings growth. PEG Ratio Calculator helps investors evaluate stock valuation relative to earnings growth and identify potentially attractive equity investments.

Highlights

  • Calculate P/E ratio from share price and earnings per share.
  • Measure stock valuation relative to expected earnings growth.
  • Estimate the PEG ratio for growth-adjusted investment analysis.
  • Compare stocks with different earnings growth rates.
  • Identify potentially attractive equity investment opportunities.

Table of Contents

  1. How PEG Ratio Calculator Works?
  2. Practical Use Cases
  3. Accuracy and Limitations
  4. Quick Examples
  5. Frequently Asked Questions (FAQs)
  6. Cite This Calculator

How PEG Ratio Calculator Works?

The PEG Ratio Calculator uses the current share price, annual earnings per share (EPS), and expected annual EPS growth to calculate two valuation measures: the price-to-earnings (P/E) ratio and the price/earnings-to-growth (PEG) ratio.

First, the P/E ratio compares the market price of one share with the earnings generated per share:

P/E=Current Share PriceEPS

For example, a share price of 100 and annual EPS of 5 produce a P/E ratio of 20x. The PEG ratio then adjusts this valuation multiple for the expected annual EPS growth rate. The growth input is used as a percentage number, so an expected growth rate of 15% is entered as 15:

PEG=P/EExpected Annual EPS Growth (%)

Using the example above, the PEG ratio is 20 ÷ 15 = 1.33x. A lower PEG ratio may indicate that the share price is lower relative to expected growth, while a higher value may indicate that the valuation is relatively expensive for the projected growth. These interpretations are comparison tools rather than automatic buy or sell signals.


Input or outputRole in the calculation
Current Share PriceMarket value of one share
Earnings Per ShareAnnual profit allocated to one share
Expected Annual EPS GrowthProjected annual percentage increase in EPS
Price-to-Earnings RatioShare price divided by EPS
PEG RatioP/E ratio divided by expected EPS growth percentage

Practical Use Cases

Individual stock investors: An investor can enter a company's current share price, annual EPS, and expected growth rate to compare its valuation with other companies in the same industry. The PEG ratio adds a growth perspective to the P/E ratio.

Growth-stock analysts: Analysts evaluating rapidly expanding companies can use the calculator to test whether a high P/E ratio is supported by a correspondingly high expected EPS growth rate.

Value investors: Value-focused investors can use the P/E and PEG outputs as initial screening measures to identify companies whose valuation appears relatively modest compared with their projected earnings growth.

Portfolio managers: Portfolio managers can calculate PEG ratios for multiple holdings and candidates, helping organize valuation comparisons before reviewing business quality, risk, cash flow, and portfolio concentration.

Finance students and educators: Students can change the share price, EPS, and growth assumptions to observe how valuation multiples respond when earnings or expected growth changes.

Accuracy and Limitations

The calculator performs the P/E and PEG arithmetic accurately from the supplied inputs, but the result is only as reliable as the share price, annual EPS, and expected growth estimate. It accepts positive EPS and positive growth values only, so it does not evaluate companies with negative earnings or zero growth. The PEG calculation uses a single expected annual EPS growth percentage and does not account for forecast uncertainty, changes in growth over time, debt, cash flow, dividends, share dilution, cyclicality, accounting differences, or the quality of earnings. PEG ratios should therefore be compared among companies with similar industries, reporting practices, and growth outlooks rather than treated as standalone valuation decisions.

Quick Examples

Example #1: Moderate Growth Stock

Evaluate a stock with a moderate valuation and expected earnings growth.

Example #2: High-Growth Stock

Assess whether a higher-priced stock is justified by strong expected EPS growth.

Example #3: Undervalued Value Stock

Measure the valuation of a lower-priced stock with steady earnings and modest growth expectations.

Frequently Asked Questions

The PEG ratio compares a company's price-to-earnings ratio with its expected earnings growth rate. It helps put a stock's valuation in the context of its potential growth.

A PEG ratio below 1 may suggest that a stock is undervalued relative to its expected earnings growth. However, it should not be treated as conclusive evidence of a bargain.

A high PEG ratio generally indicates that investors are paying a relatively high price for the company's expected growth. This can reflect high growth expectations or an elevated valuation.

A PEG ratio near 1 is often viewed as reasonably valued relative to growth, while values below 1 may appear more attractive. Appropriate benchmarks vary by industry, company quality, and market conditions.

The PEG ratio depends heavily on the accuracy of projected earnings growth, which may differ substantially from actual results. Consider profitability, debt, cash flow, competitive advantages, and other valuation measures before investing.

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