Calculating your PEG ratio is straightforward once you know the PEG Ratio formula and what each input means. This guide explains the method in plain language, walks through a manual calculation, and gives worked examples you can follow — then you can do it instantly with the PEG Ratio Calculator.
What is PEG Ratio?
The PEG Ratio calculation tells you your PEG ratio from a few simple inputs. The figure you are solving for here is the PEG ratio.
The PEG Ratio formula
The core formula is:
PEG ratio = Price-to-earnings (P ÷ E) ratio ÷ Annual earnings growth rateHere is what each input means:
- Price-to-earnings (P/E) ratio — a number. Example: 20.
- Annual earnings growth rate — a percentage, such as an annual rate. Example: 1%.
How to calculate it step by step
- Write down the price-to-earnings (p/e) ratio (for example, 20).
- Write down the annual earnings growth rate (for example, 1%).
- Apply the formula above to get your PEG ratio.
- Double-check the result with the PEG Ratio Calculator.
Worked examples
Example 1
| Input / Output | Value |
|---|---|
| Price-to-earnings (P/E) ratio | 20 |
| Annual earnings growth rate | 1% |
| PEG ratio | 2.00 |
With price-to-earnings (p/e) ratio of 20 and annual earnings growth rate of 1%, the PEG ratio works out to 2.00.
Example 2
With price-to-earnings (p/e) ratio of 40 and annual earnings growth rate of 1%, the PEG ratio works out to 4.00.
| Result | Value |
|---|---|
| PEG ratio | 4.00 |
Example 3
With price-to-earnings (p/e) ratio of 10 and annual earnings growth rate of 1%, the PEG ratio works out to 1.00.
| Result | Value |
|---|---|
| PEG ratio | 1.00 |
Tips for an accurate result
- Keep your units consistent — mixing, say, months with years or grams with kilograms is the most common source of error.
- Round only at the very end. Rounding inputs early can shift the final answer noticeably.
- Re-run the numbers whenever an input changes, rather than estimating from an old result.
Prefer not to do the maths by hand? — the PEG Ratio Calculator does it instantly, for free, with the formula and a worked example built in.
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