Set the stock price to 150, the EPS to 5.50 and the growth rate to 25 percent, and the PEG ratio calculator returns a 27.27 P/E, a 3.64 percent earnings yield, a 1.09 PEG inside the fair-value band and a 275.00 fair price under the PEG = 2 rule. The same 27.27 P/E measured against a 30 percent growth rate returns a 0.91 PEG and flips the signal to undervalued. Every number is computed locally in the browser; nothing is uploaded.
What the 27.27 P/E already tells you: one division, one yield
The P/E ratio divides the price by the earnings per share: 150 divided by 5.50 is 27.27, so the market pays 27.27 dollars of price for every 1 dollar of annual earnings. Its mirror, the earnings yield, inverts the ratio: 100 divided by 27.27 is 3.64 percent, the annual return you would collect if the company kept paying that earnings forever and the price never moved. Read the two together. A 27.27 P/E looks expensive next to a 10 percent bond, but the 3.64 percent yield is the honest number to compare against that bond. The P/E ratio guide works the same division with a book-value cross-check, which is the other half of a price opinion.
Why PEG divides by growth: the same P/E, five different answers
The PEG ratio divides that multiple by the growth rate: 27.27 divided by 25 is 1.09. It answers the question the P/E alone cannot โ how much multiple you pay per point of growth. Hold the price and the earnings fixed and move only the growth rate, and the signal walks the whole ladder: at 10 percent growth the PEG is 2.73 and the stock reads overvalued, at 15 percent it is 1.82 and fair, at 25 percent it is 1.09 and fair, at 30 percent it is 0.91 and undervalued, at 50 percent it is 0.55 and clearly cheap. The same 150 price is overpriced and cheap in the same breath; the growth assumption is the whole verdict.
The three thresholds and the PEG = 2 fair value rule
The calculator splits the PEG into three bands: below 1 it prints undervalued, below 2 fair value, at or above 2 overvalued. The fair price printed next to the signal comes from the PEG = 2 rule: EPS times growth rate times 2, which here is 5.50 times 25 times 2, a fair value of 275.00. Two boundaries matter. At 275.00 the P/E is 50.00, the earnings yield drops to 2.00 percent, and the PEG lands on exactly 2.00 โ which the calculator reads as overvalued, so 275 is the top of the fair band, not its middle. One step down at 137.50 the P/E is 25.00, the yield is 4.00 percent, the PEG is 1.00 and the stock is still fair, sitting on the other edge. The P/E P/B valuation tool reads the same price through book value and two industry averages, a second opinion on the verdict.
The weakest input is the growth rate: check it against history
The growth rate is an estimate, and it is the input the PEG amplifies the most. If the 25 percent is analyst consensus for one year and the stock has actually compounded at 15 percent over the last few years, price it at 15 and the PEG climbs from 1.09 to 1.82 โ still fair, but a different distance from the edge. Measure the track record the same way every time: the compound annual growth of EPS over a fixed window, which the CAGR guide defines and computes. Two cases the PEG cannot price at all: at a growth rate of 0 the ratio is division by zero, so the calculator prints no PEG and no fair value, and at a negative growth rate the quotient is negative and carries no valuation meaning. Those stocks have to be judged by other numbers.
From a 1.09 PEG to a position: buy below the fair price
A PEG inside the fair band is not a buy order; it is a reference price. The 275.00 fair value says what the market would pay if the 25 percent growth delivered and the stock still earned its PEG of 2 โ the current 150 sits 125 under that line, a 45.45 percent discount, and the margin of safety calculator measures exactly that gap as a percentage and against the discount you would accept. Then check the clock: at 25 percent growth, 72 divided by 25 is 2.88, so a stock that delivers its number doubles its price in under three years, and the rule of 72 guide shows how that doubling compounds if you hold.
What the PEG does not measure: risk, scale, and the path
Two stocks can hold the same 1.09 PEG and take very different roads to get there; the sharpe ratio calculator prices the return you get per unit of volatility, the number that says whether the growth is paid for in calm or in swings. The multiple also sits on a size: a 150 price on one million shares is a 150.00 million market cap, and the market cap guide explains why the same PEG on a bigger company usually carries a different risk. End with the position, not the ratio: size the trade against the 275.00 reference and the 45.45 percent gap, and keep the PEG for the moment the growth estimate changes.