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ValuationUpdated Jun 1, 2026

PEG Ratio

P/E divided by the company's expected earnings-growth rate — adjusts the P/E for how fast profits are growing.

Formula

PEG = P/E ÷ expected annual EPS growth rate (in %)

Example

Two companies, same P/E

Setup
Both trade at P/E 30. Company A is growing EPS 30% / year; Company B is growing 10%.
Calculation
A: 30 ÷ 30 = 1.0. B: 30 ÷ 10 = 3.0.
Takeaway
Same P/E, very different PEG: the faster-growing A looks better-priced relative to its growth.

What it is

The PEG ratio takes the P/E and divides it by the company's expected earnings-growth rate (in percent). A high P/E paired with very fast growth can look "cheap" on PEG; a low P/E with no growth might look "expensive".

A PEG of 1.0 is often informally described as "fairly priced relative to growth", but the heuristic isn't universal — it depends on what discount rate you'd apply.

A caveat

PEG depends entirely on the growth rate you plug in. Different analysts use different forecast windows (1-year forward, 3-year average, 5-year). Comparing two PEGs requires comparing on the same basis.

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