Price-to-Earnings to Growth (PEG & PEGY Ratio
### Growth at a Reasonable Price (GARP): Peter Lynch's PEG Ratio Made famous by legendary Fidelity Magellan fund manager **Peter Lynch** in *One Up on Wall Street*: - **Why P/E Alone is.
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📐 Formula
💡 Practical Example
For example, evaluating a growth stock trading at $145.00 with $5.80 TTM EPS, 20.0% expected earnings growth, and a 1.80% dividend yield: \. The \. Peter Lynch Fair Value is \ (trading at a 25.0% growth premium over the PEG 1.0 baseline).
📖 About Price-to-Earnings to Growth (PEG & PEGY Ratio
Growth at a Reasonable Price (GARP): Peter Lynch's PEG Ratio
Made famous by legendary Fidelity Magellan fund manager Peter Lynch in One Up on Wall Street:
- Why P/E Alone is Misleading: A P/E of 30x sounds expensive, but if the company is growing earnings at 40% annually, it is actually a bargain compared to a stagnant utility with a P/E of 15x growing at 3%.
- The PEG = 1.0 Rule: Lynch stated that a company's fair P/E multiple is equal to its percentage growth rate.
How to Use This Calculator
Enter your Current Stock Market Price ( / share) (e.g. 145.00), Trailing Diluted Earnings Per Share (TTM EPS in ) (e.g. 5.80), Forward 12-Month Estimated EPS ( / share) (e.g. 6.96 (for Forward P/E)), Expected Annual Earnings Growth Rate (EPS CAGR %) (e.g. 20.0 (3 to 5-year expected earnings growth)), and Annual Dividend Yield (%) [for Peter Lynch PEGY] (e.g. 1.80). Results update instantly as you type — adjust any value to compare scenarios.
The Formula
Price-to-Earnings to Growth (PEG & PEGY) & Peter Lynch GARP equations: P/E Ratio = (Current Stock Price) / (TTM Diluted EPS) P/E Ratio = (Current Stock Price) / (Forward 12-Month EPS Estimate) PEG Ratio = (P/E Ratio) / (Expected Annual EPS Growth Rate (\%)) Lynch Dividend-Adjusted PEGY Ratio = (P/E Ratio) / (EPS Growth Rate (\%) + Dividend Yield (\%)) Lynch Fair Value (at PEG = 1.0) = EPS × EPS Growth Rate (\%) of Safety (\%) = ((Lynch Fair Value - Market Price) / (Market Price)) × 100\%
Worked Example
For example, evaluating a growth stock trading at 145.00 with 5.80 TTM EPS, 20.0% expected earnings growth, and a 1.80% dividend yield: \. The \. Peter Lynch Fair Value is \ (trading at a 25.0% growth premium over the PEG 1.0 baseline).
Understanding Your Result
Unit conversion precision: round to the same number of significant figures as your original measurement. Converting 6 feet to meters gives 1.8288 m — but if your measurement was approximate (±1 inch), expressing more than 2 decimal places is false precision. For international trade and technical specifications, SI units (meters, kilograms, liters) are the standard. US customary units (feet, pounds, gallons) differ from Imperial UK units: 1 US gallon = 3.785 L vs. 1 UK gallon = 4.546 L.
💡 Financial Planning: Expert Principles & Risk Awareness
- All calculations assume fixed rates and idealized conditions. Real-world results vary due to market volatility, inflation, fees, and taxes.
- The Consumer Financial Protection Bureau (CFPB) recommends consulting a certified financial planner (CFP) for decisions involving significant sums.
- Run at least three scenarios: optimistic, pessimistic, and most-likely — to understand the full range of potential outcomes before committing.
- Inflation averages 2–3% annually in the US (Federal Reserve target). Long-term projections that ignore inflation significantly overstate future purchasing power.
- Tax treatment varies widely by account type (IRA, 401k, brokerage), jurisdiction, and income level. Verify tax implications with a CPA before acting.
- Compound interest works for you in savings/investments and against you in debt. The difference of even 1% in rate, sustained over decades, is enormous.
- Emergency funds (3–6 months of expenses) should be established before optimizing for returns — financial security precedes financial growth.
- Financial projections older than 12 months should be recalculated. Interest rates, tax brackets, and market conditions shift materially year to year.
Results are for informational and educational purposes only. Always verify critical decisions with a qualified professional.