Peg Ratio Calculator

What Is the PEG Ratio?

The PEG ratio stands for Price/Earnings to Growth ratio.

It compares:

• How expensive a stock is today (P/E ratio)
• How fast the company is expected to grow earnings

The basic formula

PEG Ratio = (Price ÷ Earnings Per Share) ÷ Expected Growth Rate

In simple terms:

• P/E tells you what you are paying
• Growth tells you what you are getting
• PEG puts the two together

This makes the PEG ratio more useful than the P/E ratio alone, especially for growth stocks.

Why the PEG Ratio Matters

A stock with a high P/E ratio is not always expensive. It might be growing fast.
A stock with a low P/E ratio is not always cheap. Growth might be weak.

The PEG ratio solves this problem by adjusting price for growth.

General interpretation

• PEG below 1.0
  Often seen as undervalued relative to growth
• PEG around 1.0
  Often considered fairly valued
• PEG above 1.0
  May be overvalued compared to growth expectations

These are guidelines, not rules. The PEG ratio works best as a comparison tool, not a final decision-maker.

What This PEG Ratio Calculator Does

This calculator is designed to give you a clean, fast valuation snapshot using four inputs:

1. Current stock price
2. Earnings per share (EPS)
3. Expected earnings growth rate
4. Dividend yield (optional)

From these inputs, the calculator shows:

• P/E ratio
• PEG ratio
• PEGY ratio (if dividends are included)
• A clear valuation label

Inputs Explained (Plain and Simple)

1. Current Stock Price

This is the latest trading price of the stock.
Example: 150.00

2. Earnings Per Share (EPS)

EPS shows how much profit the company earns per share.
It must be a positive number for the calculator to work correctly.

Example: 5.00

If EPS is zero or negative, the calculator correctly marks the valuation as not reliable.

3. Expected Growth Rate (%)

This is the estimated annual earnings growth rate.
Enter it as a percentage, not a decimal.

Example:

• Enter 15 for 15% growth
• Do not enter 0.15

Growth must be greater than zero for a valid PEG calculation.

4. Dividend Yield (%) – Optional

This field is used to calculate the PEGY ratio, which adjusts growth to include dividends.

Example:

• Enter 2.5 for a 2.5% dividend yield

If you leave this blank, the calculator will still compute the PEG ratio.

Outputs Explained

P/E Ratio

This is calculated first:

P/E = Price ÷ EPS

It shows how much investors are paying for each dollar of earnings.

PEG Ratio

This is the main result:

PEG = P/E ÷ Growth Rate

It shows whether the price is reasonable when growth is considered.

PEGY Ratio (Dividend Adjusted)

If a dividend is entered, the calculator also shows:

PEGY = P/E ÷ (Growth + Dividend Yield)

This is useful for dividend-paying stocks, where part of the return comes from cash payouts, not just growth.

Valuation Status Labels

The calculator automatically assigns a valuation message based on the PEG ratio:

• Undervalued / High Value
  PEG below 1.0
• Fairly Valued
  PEG between 1.0 and 1.2
• Moderately Overvalued
  PEG between 1.2 and 2.0
• Significantly Overvalued
  PEG above 2.0

These labels help you interpret results quickly without guessing.

Error Handling and Reliability Checks

This calculator is built to avoid misleading results.

It will stop and warn you if:

• Price, EPS, or growth is missing
• EPS is zero or negative
• Growth rate is zero or negative

In those cases, it clearly shows that valuation is not reliable, instead of displaying incorrect numbers.

When the PEG Ratio Works Best

The PEG ratio is most useful when:

• Comparing similar companies in the same industry
• Evaluating growth stocks
• Looking beyond surface-level P/E ratios

It works especially well for companies with stable earnings and reasonable growth forecasts.

When the PEG Ratio Can Mislead

The PEG ratio has limits. Be cautious when:

• Growth estimates are overly optimistic
• Earnings are cyclical or inconsistent
• The company is in a turnaround phase
• Growth is very high or very low

Always use the PEG ratio alongside other metrics, not in isolation.

PEG vs P/E: Quick Comparison

If you only use one, PEG usually gives the fuller picture.