Price Earnings Growth Ratio Analysis

Price Earnings Growth Ratio Analysis

See Also:
Financial Ratios
Price Earnings Ratio
Compound Annual Growth Rate (CAGR)

Price Earnings Growth Ratio Analysis Definition

Price earnings growth ratio (PEG ratio) expresses the relationship among current stock price, a company’s earning per share, and earnings expected future growth. Similar to the Price earnings ratio, the lower the PEG, the more undervalued the stock is.

Price Earnings Growth Ratio Formula

Use the following formula to calculate price earnings growth ratio:

Price to sales ratio = Price per earnings ÷ Annual EPS growth


Calculate the annual growth rate of earning for a company by the average annual growth rate over the past 5 years excluding extraordinary items.
For example, a company has a P/E of 20 and is estimated its earnings will grow 20% annually.

PEG ratio = 20 / 20 = 1


PEG is an indicator of a stock’s potential market value. So, use it to discover stocks with high growth potential while trading at a premium. In general, the value of 1 is considered a sign of good value. However, different industries trade at different PEGs. Furthermore, it is always better to compare a company to its peers group to get more useful information. The weakness of PEG ratio is that it may provide limited information since it relies heavily on earnings estimates.
Price Earnings Growth Ratio Analysis
[box]Strategic CFO Lab Member Extra
Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to create a dashboard to measure productivity, profitability, and liquidity of your company.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
Price Earnings Growth Ratio Analysis
For statistical information about industry financial ratios, please click the following website: and

Related Blogs
Does your Accounting Department Produce Net Income?

Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company?     I have been in the accounting profession for 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I

Read More »
Near Sourcing vs. Outsourcing: The Key to Cost-Effective Accounting Solutions

In this insightful interview, Dan sheds light on the critical role of accounting in business growth and success. Uncover the common pitfalls business owners face when overlooking accounting and how it can hinder access to loans and financial opportunities. Learn why good financial statements are vital for decision-making and attracting investors. With the NearSourcing model,

Read More »
Is Mexico the New China?

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

Read More »
WIKI CFO® - Browse hundreds of articles
Skip to content