What Is PEG Ratio? The price/earnings-to-growth (PEG) ratio is a valuation metric that takes into consideration a company’s growth rate as well, beyond the plain-vanilla price-to-earnings (P/E) ratio. P/E ratios aren’t always useful in isolation as they don’t take a company’s growth rate into account. For example, a growing tech company may have a very high P/E ratio and could be dismissed as being overvalued. However, by calculating the PEG ratio on the same stock, it may indicate that the stock may still be a good buy. With the PEG ratio, a company’s growth rate is put into perspective to give a more representative valuation figure. The PEG ratio was popularised by the famed investor, Peter Lynch. Calculating the PEG Ratio To calculate the PEG ratio, we take a company’s P/E ratio and divide it by its earnings per share (EPS) growth rate. PEG Ratio = P/E Ratio /...