📊 PEG Ratio Calculator
Calculate the Price/Earnings-to-Growth (PEG) ratio to find stocks that are undervalued relative to their earnings growth. Made famous by legendary investor Peter Lynch.
📋 PEG Comparison — Popular Stocks
| Stock | Price | EPS | P/E | Growth | PEG | Verdict |
|---|---|---|---|---|---|---|
| JPMJPMorgan | $200 | $18.18 | 11.0 | 8% | 1.38 | Overvalued |
| GOOGLAlphabet | $175 | $7.00 | 25.0 | 18% | 1.39 | Overvalued |
| METAMeta | $540 | $19.29 | 28.0 | 20% | 1.40 | Overvalued |
| NVDANVIDIA | $875 | $13.46 | 65.0 | 35% | 1.86 | Overvalued |
| VVisa | $285 | $9.50 | 30.0 | 13% | 2.31 | Expensive |
| AMZNAmazon | $210 | $3.50 | 60.0 | 25% | 2.40 | Expensive |
| MSFTMicrosoft | $420 | $11.53 | 36.4 | 14% | 2.60 | Expensive |
| AAPLApple | $178 | $6.42 | 27.7 | 10% | 2.77 | Expensive |
| JNJJ&J | $155 | $10.33 | 15.0 | 5% | 3.00 | Expensive |
| KOCoca-Cola | $62 | $2.50 | 24.8 | 6% | 4.13 | Expensive |
📚 What Is the PEG Ratio?
The Price/Earnings-to-Growth (PEG) ratio is a valuation metric that compares a stock's P/E ratio to its expected earnings growth rate. It was popularized by legendary Fidelity fund manager Peter Lynch in his classic book One Up on Wall Street.
The formula is simple: PEG = P/E Ratio ÷ Annual EPS Growth Rate.
While the P/E ratio tells you how much you're paying per dollar of earnings, the PEG ratio adjusts that by factoring in how fast those earnings are growing. A stock with a P/E of 30 might seem expensive — but if earnings are growing at 35% per year, the PEG is only 0.86, making it potentially undervalued.
🧠 Peter Lynch's PEG Strategy
Peter Lynch managed the Magellan Fund at Fidelity from 1977 to 1990, delivering an average annual return of 29.2%. One of his key tools was the PEG ratio.
Lynch's rules were straightforward:
- PEG < 1.0: The stock is potentially undervalued. The market isn't fully pricing in the company's growth.
- PEG = 1.0: Fairly valued. The P/E ratio matches the growth rate — you're paying a fair price.
- PEG > 2.0: The stock is likely overvalued. You're paying a premium over and above the growth rate.
Lynch emphasized that the PEG ratio works best for growth stocks — companies with earnings growing at 10–25% per year. It's less useful for utilities, REITs, or companies with negative earnings.
⚖️ PEG vs. P/E — When to Use Each
Use P/E When...
- • Comparing companies in the same sector
- • Evaluating stable, low-growth companies
- • Looking at dividend stocks or utilities
- • Quick valuation snapshot is enough
Use PEG When...
- • Comparing companies with different growth rates
- • Evaluating growth stocks (tech, healthcare)
- • A high P/E needs context
- • You want to know if growth justifies the price
Recommended Reading
Learn the PEG ratio strategy directly from the legend who made it famous. Peter Lynch's One Up on Wall Street is one of the best investing books ever written — full of practical advice for individual investors.
📚 One Up on Wall Street by Peter Lynch →📚 Beating the Street by Peter Lynch →🔗 Related Tools
Disclaimer: The PEG ratio is a useful screening tool, but it has limitations. Growth estimates are forward-looking and may not materialize. Always do thorough research before investing. This calculator is for educational purposes only and does not constitute financial advice.
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