PEG Fair Value Calculator

Calculate fair value using the Price/Earnings-to-Growth (PEG) ratio for growth stock valuation

Stock Data

$
$

TTM EPS from Yahoo Finance

%

5-year expected growth rate

1.0 = fairly valued, <1 = undervalued

Valuation Results

Enter stock data to see valuation results

All fields are required with positive values

PEG Ratio Interpretation

PEG < 1.0

Potentially undervalued. The stock may be cheap relative to its expected growth rate.

PEG = 1.0

Fairly valued. The stock price is in line with its expected earnings growth.

PEG > 1.0

Potentially overvalued. You may be paying a premium relative to expected growth.

Understanding the PEG Ratio

What is PEG Ratio?

The PEG (Price/Earnings-to-Growth) ratio is a stock valuation metric that considers both the P/E ratio and the expected earnings growth rate. It was popularized by legendary investor Peter Lynch and provides a more complete picture than P/E alone by factoring in growth.

The Formula

PEG Ratio = (P/E Ratio) / (EPS Growth Rate)

Fair Value = EPS × Growth Rate × Fair PEG

Why Use PEG for Growth Stocks?

High-growth companies often have high P/E ratios, which can make them appear expensive. The PEG ratio adjusts for this by dividing the P/E by the growth rate. A company with a P/E of 30 and 30% growth (PEG = 1.0) may be a better value than a company with a P/E of 15 and 10% growth (PEG = 1.5).

Best Use Cases

The PEG ratio works best for companies with growth rates between 10-25%. It's ideal for comparing growth stocks within the same sector. Be cautious using PEG for mature companies with low growth or hypergrowth companies where estimates are highly uncertain.

Limitations

  • Relies on accurate growth estimates, which are often wrong
  • Doesn't work well for companies with negative earnings or declining growth
  • Ignores important factors like debt, cash flow, and competitive position
  • Different industries may have different "fair" PEG standards
  • Past growth doesn't guarantee future growth

This calculator is for educational purposes only. Not financial advice.

Always conduct thorough research before making investment decisions.

Free PEG Fair Value Calculator by Money365.Market

Educational purposes only. Not financial advice.