PEG Ratio (Price/Earnings to Growth)

The P/E ratio divided by the company's expected earnings growth rate — adjusting P/E for growth.

PEG Ratio (Price/Earnings to Growth) — The P/E ratio divided by the company's expected earnings growth rate — adjusting P/E for growth.

Key facts

Category
Valuation
Definition
The P/E ratio divided by the company's expected earnings growth rate — adjusting P/E for growth.
Formula
PEG = P/E ratio / Expected annual EPS growth rate (%)
Live example
/research/stock/NVDA
Last updated
2026-06-17

Formula

PEG = P/E ratio / Expected annual EPS growth rate (%)

Worked example

A stock trades at P/E of 30 with expected 25% annual EPS growth. PEG = 30 / 25 = 1.2. Modestly expensive — paying a small premium for the growth.

Interpretive bands

PEG < 1.0
Undervalued relative to growth — paying less than $1 of P/E per 1% of growth.
PEG ≈ 1.0
Fairly priced relative to growth. The Peter Lynch threshold.
PEG > 1.5
Possibly overpriced relative to growth — pay attention to whether growth estimates hold up.

How IndexAlpha uses PEG Ratio (Price/Earnings to Growth)

PEG appears alongside P/E on the Valuation card. The growth input comes from consensus analyst EPS estimates for the next fiscal year.

See it live

The PEG Ratio (Price/Earnings to Growth) metric shows up on every IndexAlpha research page. See it now on NVDA — or research any stock to view its PEG Ratio (Price/Earnings to Growth).

Related terms

Common questions

Where does the 'expected growth rate' come from?

Consensus analyst estimates of next-fiscal-year EPS growth. The number varies by source (FactSet, Bloomberg, Zacks). IndexAlpha uses the consensus published in our market-data feed.

Is PEG better than P/E?

For growth stocks, yes — PEG adjusts for the growth that justifies a high P/E. For mature dividend stocks with low growth, PEG can be misleadingly high; use P/E or dividend yield as the primary lens.

Sources