PEG Ratio Calculator

How to use this PEG ratio calculator

What this calculator does

This calculator estimates a price/earnings-to-growth, or PEG, ratio from four company inputs. It first calculates the P/E ratio from market price and earnings per share, then estimates a sustainable earnings growth rate from retention rate multiplied by return on equity, and finally divides P/E by that growth rate expressed in percentage points. The result is a relative-valuation metric, not a forecast of a stock price and not a recommendation to buy or sell. PEG can help normalize a P/E multiple for growth, but it does not by itself capture differences in business risk, leverage, competitive position, accounting quality, or how long a growth rate can persist. For the P/E component, the SEC's Investor.gov explains the standard price-to-earnings ratio definition.

When to use it

Use PEG as a screening or comparison tool when you want to: compare companies with different earnings-growth profiles; check whether a high P/E is accompanied by a high growth estimate; test how a change in retention or ROE affects a growth-adjusted valuation multiple; or reproduce a quick valuation checkpoint from a company's reported figures. It is most useful when the companies being compared use reasonably consistent earnings definitions and when growth estimates are positive and economically meaningful.

How to calculate

1. The calculator opens with a complete demonstration: Price per share $20.00, Earnings per share (EPS) $1.50, Retention rate 60%, and Return on equity (ROE) 8%. The initial results and Excel workbook are ready immediately.
2. Replace the demonstration values with your company data. The calculator updates live, so there is no separate Calculate button. Currency fields use U.S. dollars per share, and percentage fields accept a percentage such as 8 or 8%.
3. Read the primary PEG ratio first, then review P/E ratio and Earnings growth to see which component is driving the result. The Calculation trail shows each numerical step using the same current model.
4. Select Download Excel to create a fresh workbook from the current validated inputs and calculated values. Select Reset to clear the demonstration and calculated state. After Reset, Download Excel is disabled until all four required inputs again form a valid PEG calculation.

Input guide

Price per share is required and must be a positive U.S.-dollar amount up to the calculator's supported $1 trillion per-share ceiling. A value such as 20.00 means $20 per share. The field accepts a decimal point, an optional dollar sign, and correctly grouped commas; it does not reinterpret decimal-comma or scientific notation. A higher price raises P/E and therefore raises PEG when the other inputs stay unchanged. A common mistake is mixing a current share price with EPS from an incompatible period or share class.

Earnings per share (EPS) is required, must be positive, and is supported up to $1 billion per share; a conventional P/E and PEG are not meaningful here with zero or negative earnings. A value such as 1.50 means $1.50 of earnings per common share. Higher EPS lowers P/E and PEG if the share price is unchanged. Investor.gov defines earnings per share as a public company's net profit divided by common shares, which is useful when checking the source figure.

Retention rate is required from 0% to 100% and represents the share of earnings retained in the business rather than distributed. Enter 60 for 60%. With positive ROE, a higher retention rate raises the sustainable growth estimate and lowers PEG. A 0% retention rate produces 0% modeled growth, so PEG cannot be calculated and the calculator will ask for a positive growth combination.

Return on equity (ROE) is required as a positive percentage up to 1000%. Enter 8 for 8%, not 0.08. ROE measures earnings relative to shareholders' equity; in this model it combines with the retention rate to estimate growth. Higher ROE raises modeled growth and lowers PEG, all else equal. A frequent input error is mixing percentage and decimal forms.

Output guide

PEG ratio is the primary output, displayed as a multiple. It equals P/E divided by the earnings growth rate stated in percentage points. A lower positive PEG means the current P/E is smaller relative to the modeled growth rate, while a higher PEG means the valuation multiple is larger relative to that growth estimate. This is a comparison metric, not an intrinsic-value identity. P/E ratio is price per share divided by EPS and is shown as a multiple; it rises with price and falls with EPS. Earnings growth is retention rate multiplied by ROE and is shown as a percentage; it rises with either input. The three summary pills repeat these same current values for quick scanning, and the Calculation trail displays the exact three operations rather than introducing additional outputs.

Worked example

Using the opening values, P/E is $20.00 ÷ $1.50 = 13.3333. Sustainable earnings growth is 60% × 8% = 4.80%. For PEG, the 4.80% growth rate is used as 4.80 percentage points, so 13.3333 ÷ 4.80 = 2.7778. Rounded for display, the first-open results are P/E 13.33×, Earnings growth 4.80%, and PEG ratio 2.78×. Those same canonical values are used by the visible results, the calculation trail, and the downloadable workbook.

Learn more

CFA Institute's professional material on market-based valuation multiples discusses the PEG ratio as a way to incorporate expected growth into P/E analysis and also notes limitations of multiples. For a practical reminder that PEG should not be treated as a stand-alone timing signal, see CFA Institute Research and Policy Center's discussion of PEG as a market-timing tool.