i What this calculator does
The PEG ratio divides the P/E by the expected earnings growth rate. It exists because a P/E on its own cannot distinguish an expensive company from a fast-growing one, and those are very different things.
The convention is that a PEG near 1 means the multiple is roughly matched to the growth. It is a rough guide rather than a rule, and it is only as good as the growth estimate, which is a forecast rather than a fact.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
How to use the PEG Ratio Calculator
Every field has a working default, so the calculator produces a result the moment the page loads. Replace the defaults with your own figures and the output updates when you press the button.
- 1. Share Price (R)
- 2. Earnings Per Share (R)
- 3. Expected Annual Growth (%) Forecast, not history
- 4. Dividend Yield (%) Used for the dividend-adjusted PEG
The result panel reports:
- PEG Ratio P/E divided by growth
- P/E Ratio The starting multiple
- Dividend-Adjusted PEG Growth plus yield
Alongside the headline figures, the calculator reports share price, earnings per share, expected growth, p/e at peg of 1. Those are the numbers that usually explain why the headline result came out where it did.
The breakdown below the result shows every step of the arithmetic, so you can check the figure rather than trust it. The formula panel names each input as it is used, which is useful if you want to reproduce the calculation in a spreadsheet.
Frequently asked questions
Is a PEG below 1 always good?
No. It means the multiple is below the forecast growth rate, which is a reasonable starting signal, but the forecast is the weak link. A PEG of 0.5 built on an optimistic growth estimate is worth less than a PEG of 1.2 built on a conservative one.
Which growth rate should I use?
Consensus forecast earnings growth for the next three to five years is the convention. Using one year makes the ratio volatile; using past growth assumes the future repeats. Where no forecast exists, a conservative extrapolation of the trend is better than a hopeful one.
What is the dividend-adjusted PEG?
PEGY adds the dividend yield to the growth rate before dividing. It exists because a mature company returning cash to shareholders is delivering part of its return as income rather than growth, and the plain PEG penalises that unfairly.
Does PEG work for cyclical companies?
Poorly. Resource companies on the JSE have earnings that swing with commodity prices, so any single growth figure is close to meaningless. For cyclicals, price to book and through-cycle earnings are more informative.
Who came up with PEG?
It was popularised by Peter Lynch, who used the comparison of P/E to growth rate as a quick screen. The idea is older, but the rule of thumb that a fairly priced company trades at a P/E equal to its growth rate is his.
Can PEG be negative?
Arithmetically yes, if earnings or growth are negative, but the result is meaningless. This calculator declines to print a number rather than showing one you cannot use.
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