PEG Ratio Screener — Price/Earnings-to-Growth Tool
A growth-adjusted stock valuation tool. PEG corrects for the P/E ratio's biggest blind spot: it doesn't know how fast earnings are growing. PEG < 1 may suggest undervaluation; PEG > 2 may suggest overvaluation.
What Is the PEG Ratio?
The Price/Earnings-to-Growth (PEG) ratio extends the P/E ratio by dividing it by the company's annual EPS growth rate, giving you a growth-adjusted view of valuation:
PEG Ratio = P/E Ratio ÷ Annual EPS Growth Rate (%)
Popularized by legendary fund manager Peter Lynch, the PEG ratio reflects the idea that a fast-growing company deserves a higher P/E. Two stocks with the same P/E of 20 look equally valued — until you realize one is growing earnings at 40% per year and the other at 4%. The PEG reveals which is the better deal.
Interpreting PEG Ratio Thresholds
PEG below 1.0 — potentially undervalued: You are paying less P/E than the growth rate justifies. Lynch considered a PEG below 1 an attractive entry signal. Value and growth investors alike screen for this range.
PEG between 1 and 2 — fairly valued: The price roughly reflects the growth trajectory. Most healthy growth companies trade in this band during normal market conditions.
PEG above 2 — potentially overvalued: The market is pricing in growth well beyond what earnings currently support. This is common during speculative periods or for companies with dominant competitive moats.
Caveats and Limitations
Negative EPS makes PEG unreliable. If a company has negative earnings, dividing by growth produces a meaningless result. Use price-to-sales or EV/EBITDA instead.
Growth estimates vary. PEG calculated using trailing growth differs from PEG using analyst forward estimates. Check which input is being used before drawing conclusions. For the full picture, combine PEG with insider buying activity from the Insider Signal Screener and the historical P/E Ratio Chart.
Data sourced from Yahoo Finance. Enter a ticker symbol above to load the interactive PEG ratio chart.
Related tools: P/E Ratio History Chart · Insider Signal Screener · All Stock Analysis Tools
Frequently Asked Questions
- What is the PEG ratio?
- The PEG (Price/Earnings-to-Growth) ratio is calculated as a stock’s P/E ratio divided by its annual EPS growth rate. For example, a stock with a P/E of 20 and EPS growing at 20% per year has a PEG of 1.0. The PEG ratio was popularized by investor Peter Lynch as a way to find stocks whose price doesn’t fully reflect their earnings growth potential.
- What is a good PEG ratio?
- A PEG ratio below 1.0 is generally considered potentially undervalued — you’re paying less than a dollar of P/E for each percentage point of growth. A PEG between 1 and 2 is often considered fairly valued. A PEG above 2 suggests the stock may be overvalued relative to its growth rate. However, these thresholds vary by sector; fast-growing industries often sustain higher PEGs.
- When is the PEG ratio unreliable?
- The PEG ratio is unreliable when a company has negative EPS, because dividing a negative P/E by a growth rate produces a misleading result. It is also less useful for mature, slow-growth businesses where EPS growth is near zero, and for highly cyclical companies whose earnings swing dramatically.
- How is the PEG ratio different from the P/E ratio?
- The P/E ratio shows how much you pay per dollar of current earnings, but ignores how fast those earnings are growing. The PEG ratio corrects for this by dividing P/E by the EPS growth rate, making it easier to compare companies across different growth profiles. A high-P/E stock growing at 40% per year may be cheaper on a PEG basis than a low-P/E stock growing at 2%.