Calculate the PEG ratio from share price, annual earnings per share and annual EPS growth. Enter growth as a percentage number, such as 10 for 10%. Use consistent earnings definitions and growth assumptions.

Use the same currency for price and EPS, with consistent annual earnings and growth assumptions.

Enter 10 for 10%. This model requires positive growth.

PEG Ratio Formula

The following formula is used to calculate the price-earnings to growth rate ratio.

PEG = (P:E) / EPSG
  • Where PEG is the price-earnings to growth rate ratio
  • P:E is the price-earnings ratio
  • EPSG is annual earnings per share growth expressed as a percentage number, such as 10 for 10%

P/E = share price ÷ annual EPS. PEG = P/E ÷ annual EPS growth (%). For example, price 50, EPS 2.50 and growth 10% give P/E 20 and PEG 2. This positive-growth screening model requires positive price, EPS and growth.

PEG Ratio Definition

PEG compares a price-to-earnings multiple with an annual EPS growth assumption. A lower PEG can reflect a lower P/E, higher assumed growth, or both. Different earnings definitions and forecast horizons affect comparisons. A value below one does not prove undervaluation, and a value above one does not prove overvaluation.

PEG Ratio Example

How to calculate PEG ratio?

  1. First, determine the price to earnings ratio.

    Calculate the price to earnings ratio. Visit the calculator linked above if you need help with this.

  2. Next, determine the earnings per share growth rate.

    Calculate the growth rate of the EPS.

  3. Finally, calculate the PEG ratio.

    Calculate the price to earnings growth ratio using the formula above.

FAQ

What is a PEG ratio?

A PEG ratio is a ratio of the price to earnings ratio to the earnings per share growth rate.