What is the PEG ratio?
The Price/Earnings-to-Growth (PEG) ratio adjusts the standard P/E ratio for a company’s expected earnings growth rate, giving a fuller picture of whether a stock’s price is reasonable relative to how fast it’s growing.
The formula
PEG Ratio = P/E Ratio / Annual EPS Growth Rate (as a whole number, not a decimal). A commonly cited rule of thumb is that a PEG near or below 1 may indicate a stock is reasonably priced or undervalued relative to its growth, while a PEG well above 2 may suggest it’s expensive relative to growth.
This tool is for general educational purposes. PEG ratio rules of thumb vary by industry and analyst, and growth estimates themselves are uncertain, so use this as one data point among many, not standalone investment advice.
Last reviewed August 2026