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PEG Ratio

P/E ratio divided by EPS growth rate.

The PEG ratio adjusts the P/E multiple for expected earnings growth. A PEG of 1.0 suggests the stock is fairly valued relative to its growth; below 1.0 may indicate undervaluation. It is most useful when comparing companies with different growth profiles within the same sector.

Formula
PEG=P/EEPS Growth %\text{PEG} = \frac{\text{P/E}}{\text{EPS Growth \%}}

Related Terms

P/E Ratio

Share price divided by earnings per share — how much you pay per dollar of profit.