PEG Ratio Calculator

What does this PEG ratio calculator estimate?

The price/earnings-to-growth ratio combines a valuation multiple with a modeled earnings growth rate. It starts with the price-to-earnings ratio, or P/E, calculated as share price divided by earnings per share. It then estimates sustainable earnings growth as the retention rate multiplied by return on equity. Finally, it divides the P/E ratio by the growth rate expressed as a percentage number. For example, a P/E of 15 and growth of 10% produces a PEG ratio of 1.50, not 150.

The result is a compact comparison metric, not a complete valuation. It is most useful when comparing companies that use similar accounting policies, operate in comparable industries, and have growth estimates measured over a consistent period. The calculator intentionally keeps the model transparent so you can see each intermediate value and test how changes in assumptions affect the result.

How should each input be used?

Price per share

Enter the market price of one common share in U.S. dollars. The field is required for a P/E calculation. A higher price raises the P/E and PEG when all other inputs remain unchanged. Use a price observed near the same date as the EPS data; mixing a current price with stale earnings can distort the ratio.

Earnings per share

Enter diluted EPS for the period you intend to analyze. Positive EPS is required because conventional P/E and PEG ratios are not meaningful when earnings are zero or negative. Trailing-twelve-month EPS is commonly paired with a trailing P/E, while forecast EPS is commonly paired with a forward P/E. Avoid mixing adjusted EPS for one company with GAAP EPS for another unless you understand the reconciliation.

Retention rate

Enter the percentage of earnings retained after dividends. A company retaining 60% of earnings has a 40% payout rate. The calculator accepts values from 0% to 100%. A higher retention rate increases modeled growth if ROE is positive, which lowers the PEG ratio at a fixed P/E. Retaining more earnings does not guarantee value creation; the business must reinvest those earnings productively.

Return on equity

Enter annual ROE as a percentage. ROE measures earnings relative to common shareholders’ equity. Higher ROE increases the modeled growth rate and lowers PEG, assuming retention is unchanged. Very high ROE can be driven by leverage, share repurchases, a small equity base, or one-time gains, so review the underlying financial statements rather than treating the percentage as automatically sustainable.

How are the results calculated and interpreted?

P/E ratio equals price per share divided by EPS. It shows how many dollars of market value investors assign to one dollar of annual earnings. A higher P/E may reflect stronger expected growth, lower perceived risk, higher margins, or simply a more expensive market price. A lower P/E may reflect slower growth, higher risk, cyclicality, or temporary earnings strength.

Modeled earnings growth equals retention rate multiplied by ROE. The model is often called the sustainable growth relationship. It assumes retained earnings are reinvested at the stated ROE and that capital structure and profitability remain broadly stable. Because real companies change payout policies, issue or repurchase shares, use debt, and experience changing margins, treat this as a simplified operating assumption rather than a forecast guarantee.

PEG ratio equals P/E divided by the growth percentage. A value near 1.00 means the P/E multiple numerically matches the growth rate. Values below 1.00 are sometimes described as lower relative to modeled growth, while values above 1.00 indicate a higher multiple per unit of growth. These labels are descriptive, not recommendations. A PEG of zero is not produced because zero growth makes the denominator unusable, and negative growth generally requires a different analytical framework.

Earnings yield is the inverse of P/E and is displayed as a percentage. Payout rate is 100% minus the retention rate. Both are secondary diagnostics that help cross-check the input assumptions.

How should the chart and sensitivity table be read?

The line chart holds the calculated P/E ratio constant and varies only the earnings growth rate. The center point uses your current assumptions. Points to the left show slower growth and therefore higher PEG values; points to the right show faster growth and lower PEG values. This makes denominator risk visible: when growth is small, even a modest change in the growth estimate can cause a large swing in PEG.

The table reports the exact numbers represented by the chart. Use it to compare scenarios rather than relying on the visual alone. The highlighted base row corresponds to the current retention and ROE inputs. The table and Excel workbook are built from the same calculation model, so changing an input updates the result cards, chart, rows, accessible summary, and exported workbook together.

What are the main limitations and common mistakes?

• Do not compare a trailing P/E with a long-term analyst growth rate without recognizing the mismatch in periods.
• Do not use PEG as the sole basis for an investment decision; it omits debt, cash flow quality, capital intensity, dilution, competitive risk, and valuation terminal assumptions.
• Check whether EPS is unusually high or low because of restructuring charges, tax effects, asset sales, or cyclical conditions.
• Review whether ROE is supported by durable operating returns or amplified by financial leverage.
• Use consistent data definitions across peer companies and document whether estimates are trailing, forward, GAAP, or adjusted.

For source data, review company filings through the SEC EDGAR database. The SEC’s Investor.gov education materials explain common market data fields, while FINRA’s stock evaluation guidance provides broader context for fundamental analysis.