PEG Ratio (TTM)
Returns the PEG ratio, which adjusts P/E for earnings growth rate. Popularized by Peter Lynch, PEG helps identify stocks that may be undervalued relative to their growth.
PEG Formula
PEG Ratio = P/E Ratio / Earnings Growth Rate
Example: P/E of 30 with 15% growth = PEG of 2.0
Understanding PEG
| PEG Range | General Interpretation |
|---|---|
| < 1.0 | Potentially undervalued relative to growth |
| 1.0 | Fairly valued (P/E = growth rate) |
| 1.0-2.0 | Reasonable valuation |
| > 2.0 | Potentially overvalued relative to growth |
Peter Lynch's Rule
Peter Lynch suggested that a fairly priced company has a P/E equal to its growth rate (PEG = 1).
Advantages over P/E
- Growth-adjusted: Accounts for future growth expectations
- Better comparison: Useful across companies with different growth rates
- Value + Growth: Bridges value and growth investing
Parameters
| Parameter | Description |
|---|---|
| Symbol | Stock ticker symbol |
Examples
When to Use
- GARP (Growth at Reasonable Price) investing
- Compare growth stocks fairly
- Screen for undervalued growth stocks
- Peter Lynch-style stock selection
- Adjust P/E for growth rates
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Need raw P/E ratio | PERatio() |
| Company has negative earnings | PricePerSales() |
| Low/no growth companies | PERatio() or PricePerBook() |
| Cyclical businesses | Normalized P/E |
Common Issues & FAQ
Q: Why is PEG returning "NA"? A: PEG requires:
- Positive earnings (for P/E calculation)
- Positive expected growth rate
- Both P/E and growth data available
Q: What growth rate is used? A: Typically the estimated earnings growth rate for the next 3-5 years based on analyst estimates.
Q: Why might PEG be misleading? A: PEG can be misleading when:
- Growth estimates are unreliable
- Company is cyclical
- Growth rate is extremely high or low
- Comparing companies with very different risk profiles
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