P/E Ratio & PEG Valuation Calculator (Price-to-Earnings
### Fundamental Equity Valuation: P/E, PEG & Earnings Yield The Price-to-Earnings multiple reflects the dollar amount investors are willing to pay for each dollar of corporate net.
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📐 Formula
💡 Practical Example
For example, a stock trading at $150.00 with $6.00 EPS and a 15.0% annual expected earnings growth rate: \. The Earnings Yield is \. The PEG ratio is \. If peer industry average P/E is 20.0x, target fair value is \.
📖 About P/E Ratio & PEG Valuation Calculator (Price-to-Earnings
Fundamental Equity Valuation: P/E, PEG & Earnings Yield
The Price-to-Earnings multiple reflects the dollar amount investors are willing to pay for each dollar of corporate net earnings.
The Power of the PEG Ratio (Peter Lynch)
A stock with a 30x P/E growing at 35% annually is fundamentally cheaper than a stock with a 15x P/E growing at only 5% annually. As a general benchmark, legendary fund manager Peter Lynch considered a PEG ratio below 1.0 to be a prime indicator of an undervalued growth company (GARP: Growth at a Reasonable Price).
How to Use This Calculator
Enter your Current Stock Share Price () (e.g. 150.00), Earnings Per Share (EPS, TTM or Forward ) (e.g. 6.00), Expected Annual EPS Growth Rate (%) (e.g. 15.0), Target / Industry Peer P/E Multiple (e.g. 20.0), and 10-Year Benchmark Treasury Yield (%) (e.g. 4.25). Results update instantly as you type — no submit button or page reload required. Adjust any value to compare scenarios side by side.
The Formula
Fundamental equity valuation and multiple formulas:/E Ratio = (Current Stock Price) / (Earnings Per Share (EPS)) Yield (\%) = (EPS) / (Stock Price) × 100\% = (1) / (P/E Ratio) × 100\% Ratio = (P/E Ratio) / (Annual EPS Growth Rate (\%)) Implied Fair Value: Fair Value = Target Industry P/E × EPS
Worked Example
For example, a stock trading at 150.00 with 6.00 EPS and a 15.0% annual expected earnings growth rate: . The Earnings Yield is . The PEG ratio is . If peer industry average P/E is 20.0x, target fair value is .
Understanding Your Result
The S&P 500 long-run average P/E ratio is approximately 15–17× trailing earnings. P/E ratios significantly above 25× imply high growth expectations that must materialize for the valuation to hold. EPS growth of 10–15% annually over 5+ years is considered excellent for established companies; below 5% may suggest a value trap. Price-to-book (P/B) below 1.0 can indicate undervaluation or distress — research the balance sheet composition before interpreting low P/B as cheap.
💡 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.