Investing term
What is PEG ratio?
P/E ÷ expected earnings growth rate. A way to ask 'how much am I paying per point of growth?'
The PEG ratio divides a stock's P/E by its expected earnings growth rate, putting valuation in the context of growth. It tries to answer whether a high P/E is justified by fast growth. A PEG around 1 is often considered fair, below 1 potentially cheap — but it leans entirely on growth forecasts, which are frequently too optimistic, so treat it as a rough guide.
For example
A stock at a 30 P/E growing earnings 30% a year has a PEG of 1 — the rich multiple looks reasonable given the growth, if the growth holds.
PEG ratio is taught hands-on in Stage 15 — Valuation for Investors.
See the lesson →