PEG Ratio
P/E ratio divided by earnings growth rate — adjusts valuation for growth.
What Is PEG Ratio?
The PEG ratio accounts for something the P/E ratio misses: growth. A company with a P/E of 30 might seem expensive, but if it's growing earnings at 30% per year, its PEG is 1.0 — which is considered fair. Peter Lynch popularized this metric.
Formula
PEG = P/E Ratio / Annual EPS Growth Rate (%)Why It Matters
A PEG below 1.0 suggests the stock may be undervalued relative to its growth. Above 2.0 suggests it may be overvalued. It's most useful for comparing growth stocks where raw P/E ratios can be misleading.
Typical Ranges: Below 1.0 is potentially undervalued. 1.0 is considered fairly valued. Above 2.0 is expensive relative to growth.
Real Examples from Our Database
Based on the latest data in our system. Values may change.
Related Terms
See This Metric in Action
Our DVR Score evaluates peg ratio alongside 50+ other metrics to give you one clear picture.
Analyze Any Stock