Also called Price/earnings to growth
PEG
A P/E adjusted for how fast the company is growing. Around 1.0 is conventionally treated as fair, though the convention has little theory behind it.
Updated 2026-09-03
How it is calculated
PEG = forward P/E ÷ growth
The PEG ratio divides the price-to-earnings ratio by the expected growth rate, as an attempt to answer the question a raw P/E cannot: is this multiple justified by how fast the company is growing.
PEG = P/E ÷ growth rate (in percentage points)
A P/E of 30 on 30 percent growth is a PEG of 1.0. Below 1.0 is the conventional rule of thumb for cheap.
It is a rough heuristic and it should be treated as one. It assumes a linear relationship between growth and a fair multiple, which is not what discounting implies, and it ignores the discount rate and the balance sheet entirely. Two companies with identical PEGs and different risk profiles are not equally priced.
See also
- Forward P/E — The same ratio against next year's expected earnings, so it depends on a forecast rather than a fact.
- Growth rate — Year-one growth, faded toward the perpetual rate across the horizon. Left blank it comes from the company's own history, capped at the sector ceiling, and a genuine decline is kept rather than floored up.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
