What is a good PEG ratio?

There is no universal good PEG ratio. Use the live market and distribution context as the starting point, then verify that the growth estimate is positive, comparable, and durable enough to support the valuation.

What does the PEG ratio measure?

The PEG ratio measures valuation relative to expected earnings growth by dividing the P/E ratio by an EPS growth rate. It helps distinguish a high P/E supported by growth from a high P/E that may rely on optimistic expectations.

Is a lower PEG ratio better?

A lower PEG can indicate cheaper growth, but it is not automatically better. The growth estimate may be too optimistic, temporary, or inconsistent with the company's risk profile. Confirm the earnings base and forecast period before relying on the ratio.

How is PEG different from P/E?

P/E compares price with current or forward earnings. PEG adds expected earnings growth, which can make two stocks with similar P/E ratios look very different.

Can the PEG ratio be negative?

Yes. Negative earnings or negative expected growth can produce a negative PEG, but that result is usually hard to interpret and often not useful.

What is the PEG Ratio?

The price/earnings-to-growth (PEG) ratio divides a company's P/E ratio by its expected earnings growth rate, framing valuation against how fast earnings are expected to grow.

The price/earnings-to-growth ratio compares a company's P/E ratio with its expected EPS growth rate. It adds growth context to valuation by asking whether the earnings multiple is high or low relative to the growth investors expect. The ratio is most informative when earnings are positive and the growth input is measured consistently across companies.

How to calculate it

Formula

PEG Ratio = P/E Ratio / Expected EPS Growth Rate

Example

Example frame: a PEG ratio falls when expected EPS growth rises relative to the P/E ratio, and rises when the P/E is high compared with the growth estimate. Microsoft (MSFT) live stock page.

Growth-input variants

PEG can be calculated with trailing growth, forward growth, or long-term consensus growth. Those versions can lead to different conclusions, so the growth period matters.

Benchmarks

PEG comparisons are strongest inside sectors where companies have similar margins, reinvestment needs, and forecast horizons. Use the live S&P 500 benchmark and distribution as context, then check whether the growth estimate behind the ratio is comparable.

Sector comparison

As of Aug 21, 2026 | n=12Median PEG Ratio by sector

Sector	Median PEG Ratio	As of
S&P 500	0.41x	Aug 21, 2026
Industrials	1.41x	Aug 21, 2026
Technology	0.6x	Aug 21, 2026
Financial Services	0.46x	Aug 21, 2026
Healthcare	0.39x	Aug 21, 2026
Utilities	0.35x	Aug 21, 2026
Basic Materials	0.31x	Aug 21, 2026
Energy	0.25x	Aug 21, 2026
Consumer Cyclical	0.23x	Aug 21, 2026
Real Estate	0.15x	Aug 21, 2026
Consumer Defensive	0.05x	Aug 21, 2026
Communication Services	0.03x	Aug 21, 2026

Universe distribution

As of Jun 23, 2026 | n=1,481Universe distribution versus S&P 500Typical range is the 25th to 75th percentile: -0.24x to 0.75x. Values outside that band need a business-specific explanation.

Chart view is trimmed to the 5th-95th percentile for readability.

Interpretation

How to read it

Start with the P/E input so you know what valuation multiple the PEG ratio is trying to explain.
Check whether the growth estimate is forward-looking, trailing, one-year, or multi-year before comparing companies.
Compare the PEG ratio with sector and universe percentiles, then verify that earnings are positive and the growth rate is not temporarily inflated.

High vs low

A lower PEG can suggest that a stock is priced more cheaply relative to expected growth, but only if the growth estimate is credible and repeatable. A higher PEG can indicate that investors are paying a richer price for growth, quality, or lower perceived risk. Very low or negative PEG readings often deserve skepticism because depressed earnings, negative growth, or unstable forecasts can distort the ratio. Treat PEG as a cross-check on P/E, not as a standalone valuation rule. The P/E ratio is the valuation input inside the PEG ratio.

Reference

Extremes

As of Aug 21, 2026 | sp500Current highest and lowest PEG RatioThese are the top and bottom 3 companies in the S&P 500 for this metric.

Highest

Zebra Technologies Corporation (ZBRA)
Technology
1,801.4x
PEG Ratio
ServiceNow, Inc. (NOW)
Technology
646.2x
PEG Ratio
A. O. Smith Corporation (AOS)
Industrials
411.1x
PEG Ratio

Lowest

Verisk Analytics, Inc. (VRSK)
Technology
-542.4x
PEG Ratio
Zimmer Biomet Holdings, Inc. (ZBH)
Healthcare
-488.8x
PEG Ratio
NiSource Inc (NI)
Utilities
-238.9x
PEG Ratio

Group	Company	Ticker	Sector	PEG Ratio	As of
Highest	Zebra Technologies Corporation	ZBRA	Technology	1,801.4x	Aug 21, 2026
Highest	ServiceNow, Inc.	NOW	Technology	646.2x	Aug 21, 2026
Highest	A. O. Smith Corporation	AOS	Industrials	411.1x	Aug 21, 2026
Lowest	Verisk Analytics, Inc.	VRSK	Technology	-542.4x	Aug 21, 2026
Lowest	Zimmer Biomet Holdings, Inc.	ZBH	Healthcare	-488.8x	Aug 21, 2026
Lowest	NiSource Inc	NI	Utilities	-238.9x	Aug 21, 2026

Limitations

The PEG ratio is useful, but it is only as reliable as the growth input. Its main limits are:

Uses growth estimates, which can change quickly as fundamentals or analyst expectations shift.
Works poorly when earnings are negative, unusually depressed, or unusually high. Read about Earnings Per Share (EPS).
Does not directly account for debt, cash, or capital intensity. Read about EV/EBITDA.
Can make cyclical companies look cheap near peak earnings growth.

PEG Ratio