PEG Ratio Calculator
Calculate Price/Earnings to Growth ratio for comprehensive stock valuation analysis
Calculate PEG Ratio
Current market price per share
Company's total net earnings
Total number of shares outstanding
Percentage of earnings retained (not paid as dividends)
Company's return on equity percentage
PEG Ratio Analysis Results
PEG Formula: PEG Ratio = P/E Ratio ÷ Earnings Growth Rate
P/E Calculation: $0.00 ÷ $0.00 = 0.00x
Growth Rate: 0% × 0% = 0.00%
Benchmark: PEG < 1.0 = Undervalued, PEG = 1.0 = Fair Value, PEG > 1.0 = Overvalued
PEG Ratio Interpretation
PEG < 1.0: Stock may be undervalued relative to growth prospects
PEG ≈ 1.0: Stock appears fairly valued considering growth rate
PEG 1.0-1.5: Slightly overvalued but may still be acceptable
PEG > 1.5: Stock likely overvalued relative to growth prospects
Example: Company Alpha Analysis
Company Data
Stock Price: $20.00
Total Earnings: $15,000,000
Shares Outstanding: 10,000,000
Retention Rate: 60%
Return on Equity (ROE): 8%
Step-by-Step Calculation
1. EPS: $15,000,000 ÷ 10,000,000 = $1.50
2. P/E Ratio: $20.00 ÷ $1.50 = 13.33x
3. Growth Rate: 60% × 8% = 4.8%
4. PEG Ratio: 13.33 ÷ 4.8 = 2.78
Assessment: Overvalued (PEG > 1.5)
PEG vs P/E Ratio
P/E Ratio
Shows how much investors pay per dollar of earnings but ignores growth prospects.
PEG Ratio
Adjusts P/E ratio for growth rate, providing better comparison between companies with different growth rates.
Key Advantage: PEG ratio helps identify whether a high P/E is justified by strong growth prospects.
Investment Analysis Tips
Compare PEG ratios within the same industry
Consider the reliability of growth estimates
Use historical growth rates as reference
Factor in business cycle and economic conditions
Don't rely on PEG alone - use with other metrics
Understanding PEG Ratio Analysis
What is PEG Ratio?
The Price/Earnings to Growth (PEG) ratio is a valuation metric that compares a company's P/E ratio to its expected earnings growth rate. It provides a more comprehensive view of a stock's value by considering both current valuation and future growth prospects.
Why Use PEG Ratio?
- •Adjusts P/E ratio for growth expectations
- •Enables comparison of companies with different growth rates
- •Helps identify undervalued growth stocks
- •More balanced than P/E ratio alone
Calculation Components
PEG Ratio = P/E Ratio ÷ Growth Rate
P/E Ratio = Stock Price ÷ EPS
Growth Rate = Retention Rate × ROE
- Stock Price: Current market price per share
- EPS: Earnings per share (annual)
- Growth Rate: Expected annual earnings growth
- Retention Rate: % of earnings retained
- ROE: Return on shareholders' equity
Note: Growth rates should be sustainable and based on realistic projections, not just historical highs.
Investment Decision Framework
Undervalued (PEG < 1.0)
- • Stock trading below fair value
- • Strong growth prospects
- • Potential buying opportunity
- • Verify growth sustainability
Fair Value (PEG ≈ 1.0)
- • Reasonably priced for growth
- • P/E justified by growth rate
- • Consider other factors
- • Monitor for changes
Overvalued (PEG > 1.5)
- • High price relative to growth
- • Exercise caution
- • Wait for better entry point
- • Consider risk factors