PEG Ratio Calculator: Is This Stock Fairly Valued?

Is a 1.00 PEG good or bad?

On the defaults — a $150.00 share price, $6.00 of earnings per share and 25% growth — the P/E is 25.00 and the PEG ratio is 1.00. The PEG ratio is the price you pay for each unit of earnings growth — the P/E divided by the growth rate. As a rough yardstick, a PEG of 1.00 means the price matches the growth — often read as fairly valued. A PEG below 1.00 can mean the market is pricing in slower growth than the forecast — or that the stock is cheap for its growth. A PEG above 1.00 can mean the market expects faster growth than the forecast — or that the stock is expensive for its growth. A 1.00 PEG is neither good nor bad on its own: it is the price per unit of growth, and the growth forecast decides what you pay for.

Three things about the model are worth stating plainly.

First, the P/E is $150.00 ÷ $6.00 = 25.00. Second, the PEG ratio is 25.00 ÷ 25 = 1.00. And third, the share price needed for a 1.50 PEG is 1.50 × $6.00 × 25 = $225.00, and the EPS needed for a 1.50 PEG is $150.00 ÷ (1.50 × 25) = $4.00; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $150.00 share price, $6.00 earnings per share, 25% growth, target PEG 1.50.

Line 1 — the P/E. The P/E is $150.00 ÷ $6.00 = 25.00.

Line 2 — the PEG ratio. The PEG ratio is 25.00 ÷ 25 = 1.00.

Line 3 — the share price needed. The share price needed for a 1.50 PEG is 1.50 × $6.00 × 25 = $225.00.

Line 4 — the EPS needed. The EPS needed for a 1.50 PEG is $150.00 ÷ (1.50 × 25) = $4.00.

Line 5 — the check. $225.00 ÷ $6.00 = 37.50, and 37.50 ÷ 25 = 1.50, the target PEG; and $150.00 ÷ $4.00 = 37.50, and 37.50 ÷ 25 = 1.50, the target PEG.

Every branch, checked

Share price $180.00: Share price $180.00; earnings per share $6.00; EPS growth rate 25%; P/E 30.00; PEG ratio 1.20; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $4.80 — With a share price of $180.00 the P/E rises to 30.00 and the PEG rises to 1.20 — the price is above the growth.

EPS $7.50: Share price $150.00; earnings per share $7.50; EPS growth rate 25%; P/E 20.00; PEG ratio 0.80; share price needed for the 1.50 target $281.25; EPS needed for the 1.50 target $4.00 — With EPS of $7.50 the P/E falls to 20.00 and the PEG falls to 0.80 — the price is below the growth.

Growth 15%: Share price $150.00; earnings per share $6.00; EPS growth rate 15%; P/E 25.00; PEG ratio 1.67; share price needed for the 1.50 target $135.00; EPS needed for the 1.50 target $6.67 — With growth of 15% the P/E stays at 25.00 and the PEG rises to 1.67 — the same price for slower growth.

Growth 30%: Share price $150.00; earnings per share $6.00; EPS growth rate 30%; P/E 25.00; PEG ratio 0.83; share price needed for the 1.50 target $270.00; EPS needed for the 1.50 target $3.33 — With growth of 30% the P/E stays at 25.00 and the PEG falls to 0.83 — the same price for faster growth.

Share price $90.00: Share price $90.00; earnings per share $6.00; EPS growth rate 25%; P/E 15.00; PEG ratio 0.60; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $2.40 — With a share price of $90.00 the P/E falls to 15.00 and the PEG falls to 0.60 — the price is well below the growth.

EPS $0: Share price $150.00; earnings per share $0.00; EPS growth rate 25%; P/E —; PEG ratio — (undefined: no earnings to divide the price by); share price needed for the 1.50 target —; EPS needed for the 1.50 target — — With no earnings there is nothing to divide the price by, so the PEG ratio cannot be computed — the calculator shows “—” with a note, never Infinity or NaN.

What-if bars — Share price $200.00, EPS $12.00, growth 10%: share price $200.00: PEG 1.33; EPS $12.00: P/E 12.50, PEG 0.50; growth 10%: PEG 2.50 — A $200.00 share price gives a PEG of 1.33; EPS of $12.00 gives a PEG of 0.50; growth of 10% gives a PEG of 2.50.

The reverses, worked backwards

Smallest whole-cent share price for the PEG to reach 1.00: At the displayed $150.00 the figures are Share price $150.00; earnings per share $6.00; EPS growth rate 25%; P/E 25.00; PEG ratio 1.00; share price needed for the 1.00 target $150.00; EPS needed for the 1.00 target $6.00. At the displayed $150.00 the PEG is 1.00 (exactly 1.00). At $149.99 the price is 1 cent short of the $150.00 needed — and the unrounded PEG is 0.999933, which displays as 1.00 after rounding, so $150.00 is the smallest whole-cent share price for the PEG to reach 1.00.

Smallest whole-cent share price for the PEG to reach 1.50: At the displayed $225.00 the figures are Share price $225.00; earnings per share $6.00; EPS growth rate 25%; P/E 37.50; PEG ratio 1.50; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $6.00. At the displayed $225.00 the PEG is 1.50 (exactly 1.50). At $224.99 the price is 1 cent short of the $225.00 needed — and the unrounded PEG is 1.499933, which displays as 1.50 after rounding, so $225.00 is the smallest whole-cent share price for the PEG to reach 1.50.

Largest whole-cent EPS for the PEG to STAY at or above 1.00: At the displayed $6.00 the figures are Share price $150.00; earnings per share $6.00; EPS growth rate 25%; P/E 25.00; PEG ratio 1.00; share price needed for the 1.00 target $150.00; EPS needed for the 1.00 target $6.00. At the displayed $6.00 the PEG is 1.00 (exactly 1.00). At $6.01 the EPS is 1 cent over the $6.00 needed — and the unrounded PEG is 0.998336, which displays as 1.00 after rounding, so $6.00 is the largest whole-cent EPS for the PEG to stay at or above 1.00.

Largest whole-hundredth growth rate for the PEG to STAY at or above 1.50: At the displayed 16.67% the figures are Share price $150.00; earnings per share $6.00; EPS growth rate 16.67%; P/E 25.00; PEG ratio 1.50; share price needed for the 1.50 target $150.03; EPS needed for the 1.50 target $6.00. At the displayed 16.67% the PEG is 1.50 (unrounded 1.499700, which displays as 1.50 after rounding). At 16.68% the growth is 0.01 points over the 16.67% needed — and the unrounded PEG is 1.498801, which displays as 1.50 after rounding, so 16.67% is the largest growth rate (to the hundredth) for the PEG to stay at or above 1.50.

Smallest whole-cent share price for the PEG to reach 2.00: At the displayed $300.00 the figures are Share price $300.00; earnings per share $6.00; EPS growth rate 25%; P/E 50.00; PEG ratio 2.00; share price needed for the 2.00 target $300.00; EPS needed for the 2.00 target $6.00. At the displayed $300.00 the PEG is 2.00 (exactly 2.00). At $299.99 the price is 1 cent short of the $300.00 needed — and the unrounded PEG is 1.999933, which displays as 2.00 after rounding, so $300.00 is the smallest whole-cent share price for the PEG to reach 2.00.

Largest whole-cent EPS for the PEG to STAY at or above 0.50: At the displayed $12.00 the figures are Share price $150.00; earnings per share $12.00; EPS growth rate 25%; P/E 12.50; PEG ratio 0.50; share price needed for the 0.50 target $150.00; EPS needed for the 0.50 target $12.00. At the displayed $12.00 the PEG is 0.50 (exactly 0.50). At $12.01 the EPS is 1 cent over the $12.00 needed — and the unrounded PEG is 0.499584, which displays as 0.50 after rounding, so $12.00 is the largest whole-cent EPS for the PEG to stay at or above 0.50.

A warning about the neighbours: every neighbour above shows as the target when rounded to two decimals, but its unrounded PEG is a hair below the target. An investor underwriting on the unrounded PEG would still say no where the unrounded figure misses the line. The page prints the unrounded neighbour value in full so the rounding does not mislead you: 0.999933, 1.499933, 0.998336, 1.499700, 1.498801, 1.999933 and 0.499584.

What the defaults assume

The defaults are a $150.00 share price, $6.00 of earnings per share, 25% growth and a target PEG of 1.50 — Share price $150.00; earnings per share $6.00; EPS growth rate 25%; P/E 25.00; PEG ratio 1.00; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $4.00. With Share price $180.00, Share price $180.00; earnings per share $6.00; EPS growth rate 25%; P/E 30.00; PEG ratio 1.20; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $4.80. With EPS $7.50, Share price $150.00; earnings per share $7.50; EPS growth rate 25%; P/E 20.00; PEG ratio 0.80; share price needed for the 1.50 target $281.25; EPS needed for the 1.50 target $4.00. With Growth 15%, Share price $150.00; earnings per share $6.00; EPS growth rate 15%; P/E 25.00; PEG ratio 1.67; share price needed for the 1.50 target $135.00; EPS needed for the 1.50 target $6.67. With Growth 30%, Share price $150.00; earnings per share $6.00; EPS growth rate 30%; P/E 25.00; PEG ratio 0.83; share price needed for the 1.50 target $270.00; EPS needed for the 1.50 target $3.33. With Share price $90.00, Share price $90.00; earnings per share $6.00; EPS growth rate 25%; P/E 15.00; PEG ratio 0.60; share price needed for the 1.50 target $225.00; EPS needed for the 1.50 target $2.40. With EPS $0, Share price $150.00; earnings per share $0.00; EPS growth rate 25%; P/E —; PEG ratio — (undefined: no earnings to divide the price by); share price needed for the 1.50 target —; EPS needed for the 1.50 target —. With What-if bars — Share price $200.00, EPS $12.00, growth 10%, share price $200.00: PEG 1.33; EPS $12.00: P/E 12.50, PEG 0.50; growth 10%: PEG 2.50. With Growth 0%, PEG ratio — (undefined: no growth to divide the P/E by). With EPS $0, PEG ratio — (undefined: no earnings to divide the price by). With Share price $149.99, PEG ratio 1.00. With EPS $6.01, PEG ratio 1.00. With Share price $150.00, PEG ratio 1.00. With Growth 16.68%, PEG ratio 1.50. With EPS −$2.00, P/E −75.00; PEG ratio −3.00 (unrounded −3). With PEG bars, share price $200.00: PEG 1.33; EPS $12.00: P/E 12.50, PEG 0.50; growth 10%: PEG 2.50.

A note on the rounding: with a share price of $149.99 the unrounded PEG is 0.999933, which rounds half-up to 1.00 — but it is still below the 1.00 line. With EPS of $6.01 the unrounded PEG is 0.998336, which rounds to 1.00. With growth of 16.68% the unrounded PEG is 1.498801, which rounds half-up to 1.50 — but it is just below the 1.50 line. The page prints the unrounded values so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The investor checking a growth stock before buying: they learn a $150.00 share price on $6.00 of earnings growing 25% is a 1.00 PEG — and they check the $225.00 reverse to see the share price a 1.50 PEG needs.
• The shareholder watching a loss-making company: they learn a negative PEG means the company lost money — a loss divided by growth is still negative, and it is not a bargain signal — and they check the $4.00 reverse to see the EPS a 1.50 PEG needs.
• The value hunter comparing two stocks: they learn a 1.00 PEG means the price matches the growth — and they check the $150.00 reverse to see the share price a 1.00 PEG needs.
• The student learning valuation ratios: they learn the PEG is the P/E divided by the growth rate — the P/E is the “P” in the PEG — and they check the 16.67% reverse to see the growth rate a 1.50 PEG needs.

Accuracy & limitations

The math is first-principles: the PEG ratio is (share price ÷ earnings per share) ÷ EPS growth rate; the share price needed at the target is the target PEG times EPS times the growth rate; the EPS needed at the target is the share price divided by (target PEG times the growth rate) — all rounded to two decimals half-up. The reverses are judged on the UNROUNDED PEG: a neighbour one cent or one hundredth short shows as the target when rounded to two decimals, but its unrounded PEG is below the target, so it does not meet the bar — the page prints the unrounded neighbour value in full. A negative PEG means negative earnings: at −$2.00 of EPS the P/E is −75.00 and the PEG is −3.00 (unrounded −3) — a negative PEG means the company lost money — a loss divided by growth is still negative, and it is not a bargain signal — so the PEG is negative and the calculator shows the negative figure with a note, never hides it and never shows “—” for it. Zero earnings or zero growth is undefined: with no earnings there is nothing to divide the price by, and with no growth there is nothing to divide the P/E by, so the PEG ratio cannot be computed — the calculator shows “—” with a note, never Infinity or NaN. What the model cannot do is judge the stock: growth forecasts are guesses, so a PEG built on a growth rate that never arrives is a PEG built on sand — test the growth rate against the company’s last five years; use the same growth window on both sides — forecast (forward) growth with forecast earnings, or past (trailing) growth with past earnings — never mix them; compare PEGs within one industry, because fast-growing sectors carry higher PEGs than slow ones, so a 1.50 PEG in software and a 1.50 PEG in utilities are different stories; and the PEG says nothing about debt, cash flow or the quality of the earnings. Use it to see the price you pay for each unit of earnings growth — then read the rest of the accounts.

Frequently asked questions