PEG Ratio Calculator

A PEG ratio calculator divides the price-to-earnings ratio (P/E) by expected annual growth in earnings per share (EPS), entered as a percentage number. Use the PEG Ratio result for that arithmetic. Forward PEG and the industry comparison use preset assumptions you cannot edit here. The Recommendation label comes from fixed rules without company research. Zero or negative growth produces an unusable result in this tool.

Enter growth as a percentage number

The form asks for PE Ratio, EPS Growth Rate (%) and Stock Price (Optional). PE Ratio is the share price divided by earnings per share. EPS Growth Rate is your expectation for annual growth in those earnings. Stock Price does not change any displayed result. This form has no company-name field and does not retrieve company accounts.

The calculation is PEG = P/E ÷ expected EPS growth in percentage points. In the made-up example below, enter 20 for 20% growth. The result is a ratio, so do not add a percent sign to PEG itself. To calculate P/E first, use the P/E ratio calculator and check the earnings period it represents.

PEG ratio formula and how to calculate it

The PEG ratio formula is: PEG = P/E ÷ expected annual EPS growth (in percentage points). P/E is the price-to-earnings ratio, which is the share price divided by earnings per share (EPS, the profit that belongs to one share). Growth is the yearly rise in EPS you expect, written as a plain number such as 15 for 15%.

• Step 1: Find the P/E. Divide the share price by EPS, or use the P/E ratio calculator. Example: a price of ₹450 and EPS of ₹15 gives a P/E of 30.
• Step 2: Write down the expected EPS growth for one stated period. Example: 25% a year.
• Step 3: Divide the P/E by the growth number. 30 ÷ 25 = 1.20.

The made-up numbers above (price ₹450, EPS ₹15, growth 25%) only show the arithmetic. They do not describe a listed company. If you do not have EPS yet, the EPS calculator works it out from profit and share count. The PEG ratio glossary entry gives a short definition.

Worked example: the same earnings multiple, different growth

Assume a fictional company has a P/E of 30 and expected annual EPS growth of 20%. Enter those values and an illustrative stock price of ₹600. PEG = 30 ÷ 20 = 1.50. Changing only the optional stock price leaves the headline ratio unchanged. The example describes arithmetic; it does not describe a listed company or its prospects.

The table keeps the earnings multiple fixed so the growth assumption is visible. A higher forecast makes the ratio smaller before the business has delivered any extra earnings. When comparing two companies, save the forecast source and its date alongside each result. Otherwise an apparently cheaper company may simply have a more optimistic forecast.

What is a good PEG ratio?

There is no official band. Many textbooks and websites use 1 as a reference line because it means the P/E number equals the growth number. NYU's Aswath Damodaran describes this simplest form of the approach, where a company with a P/E below its expected growth rate is viewed as undervalued, and then warns that there is no basis for believing a company is undervalued just because of that. The same lecture says a low reading can also fit a fairly valued or overvalued company if interest rates are high or the business is risky.

Sector context matters in India. A bank, an IT services company and a capital goods company have different growth patterns and risk levels, so one cut-off for all of them can mislead. Compare a company with others in the same sector, using the same earnings base and forecast period for each. This is a way to organise your own research, not a signal to buy or sell.

Match the earnings base and forecast horizon

Damodaran’s NYU teaching material defines PEG as P/E divided by expected EPS growth and stresses consistent earnings bases, forecast periods and sources. A forward earnings figure can already include growth that also appears in the denominator. Check the starting earnings year before combining the two. The primary explanation also warns that a P/E below expected growth does not by itself establish undervaluation.

• Record whether earnings are trailing or forecast and whether they cover the whole business or only the parent company.
• Record the start and end of the growth estimate. A recent rebound and a longer forecast answer different questions.
• Check whether unusual income, a loss-making base period or changes in shares distort EPS.
• Keep the same definition when comparing companies. Do not silently compare one analyst’s forecast with another company’s historical growth.

An EPS calculation can help separate earnings per share from the total profit reported in a headline. It cannot establish whether future earnings will arrive. In a manual research note, write down what would make your growth assumption fail, such as a temporary recovery ending or extra capital being needed to sustain sales.

PEG ratio vs P/E ratio

P/E tells you how many rupees the market pays for one rupee of current earnings. It says nothing about how fast those earnings are changing. Two companies can both trade at a P/E of 30, yet one may be growing EPS at 10% and the other at 30%. PEG adds the growth number so the two can be set side by side.

Company C has the lowest P/E, but Company B has the lowest PEG. That is the point of the extra step. It is also the weakness: the PEG is only as good as the growth forecast. A forecast that is too high makes PEG look low. For the P/E side of the question, see the P/E ratio glossary entry.

Why a low PEG is only a starting question

A PEG near 1 means the P/E numerically matches the percentage growth assumption. It is a comparison convention rather than a universal fair price. NYU’s analysis shows that risk, interest rates, payout policy and the length of growth matter. Dividing by growth does not remove those differences.

For the hypothetical P/E of 30, moving growth from 20% to 10% changes PEG from 1.50 to 3.00 without changing price or current earnings. That is a useful reason to preserve a cautious scenario. It is not evidence that the market will reprice the share to match either scenario.

Debt and cash deserve a separate check because PEG is based on equity earnings. The enterprise value calculator addresses a different question about equity value, debt and cash. An ROE and ROCE comparison, which examines returns on capital, can add context about how much capital supports growth. Neither supplies a missing growth forecast.

PEGY ratio: adding dividend yield

PEGY is a variation used for companies that pay dividends. The common formula is PEGY = P/E ÷ (expected EPS growth % + dividend yield %). Dividend yield is the yearly dividend divided by the share price. Adding it to the denominator gives credit for the cash returned to shareholders.

Made-up example: P/E 24, expected EPS growth 12% and dividend yield 3%. PEG = 24 ÷ 12 = 2.00. PEGY = 24 ÷ (12 + 3) = 24 ÷ 15 = 1.60. The dividend lowers the reading from 2.00 to 1.60. You can find a yield with the dividend yield calculator.

This calculator has no dividend-yield input and does not show a PEGY card. To get PEGY, take the P/E and growth you used here, add the yield to the growth figure, and divide by hand. Companies that pay little or no dividend will show almost no difference between PEG and PEGY.

Which cards need extra caution on this tool

Forward PEG uses a preset forward earnings multiple because this form does not ask you for one. The industry comparison also uses a preset benchmark, with no industry selector. Treat neither as a current peer comparison. Growth Quality is a label derived from your entered growth rate; it has not checked the company’s financial history. Suitable For and Recommendation are rule-based labels, not personal suitability assessments.

Fair P/E sets the earnings multiple equal to the growth assumption, then rounds the displayed multiple to a whole number. That is a chosen PEG convention, not an independently established valuation. The optional price field cannot make the comparison company-specific when the necessary company data are absent. Read the arithmetic separately from the labels.

Zero growth is replaced by a positive preset, and negative growth is forced to a small positive value. A printed result from those entries is unsuitable for interpreting a business with flat or shrinking earnings. Zero P/E also triggers a preset. Use positive, meaningful inputs for the worked method and leave PEG unused when its denominator does not describe positive expected growth.

Negative or very high PEG

PEG breaks down when the growth figure is zero, negative or very small. A negative growth number gives a negative PEG, which does not mean the stock is cheap. It means earnings are expected to fall. Zero growth means dividing by zero, which has no answer. This tool swaps zero or negative growth for a small positive preset, so a printed result from those entries should not be used.

• A tiny positive growth number (for example 1%) produces a very large PEG. That reflects the near absence of growth, not a precise price signal.
• A loss-making base year can produce a huge growth percentage when profit turns slightly positive. That rebound is hard to repeat the next year.
• A very high PEG with a falling EPS forecast usually means PEG is the wrong tool. Use other measures, such as the ROE and ROCE calculator or the enterprise value calculator.

Made-up example: P/E 20 with expected growth of -5% gives 20 ÷ -5 = -4.00. The negative sign only shows that the denominator is negative. Leave PEG unused in such a case.

PEG ratio questions

Sources

• NYU: PEG definitions and limitations (checked 15 Oct 2026).