PEG: what it means and how to read it
What is PEG?
P/E ÷ yearly profit growth (%). It adjusts the P/E for how fast profits are growing.
The PEG ratio adjusts the P/E for growth. Two companies on a P/E of 30 are not equally priced if one is growing profit at 30% a year and the other at 10%: the first has a PEG of 1, the second a PEG of 3. The idea, made popular by Peter Lynch, is that a fairly priced company trades at a P/E about equal to its growth rate.
Everything rests on which growth figure is used. A PEG built on analysts' forecasts is only as good as the forecasts; one built on the last three years of reported EPS growth is checkable but looks backwards. A vendor's PEG that does not say which growth it used should be read beside one whose growth figure you can see.
How it is calculated
A worked example
Why does PEG matter?
A high P/E can be fair if profits are growing fast.
What is a good PEG?
Around 1 is often called fair; below 1 may be cheap for the growth. Growth rates change, so treat it as a rough guide.
Around 1 is usually read as fairly priced for the growth, well below 1 as cheap for it, and above 2 as paying up for growth that still has to arrive. The reading only holds when growth is positive and reasonably steady.
Reading scale
What are the common mistakes with PEG?
What is a typical PEG in India today?
The median across the 2274 listed companies that report it, as of 12 Oct 2026. Half sit above each figure and half below.