What is the PEG ratio?
PEG is P/E divided by the expected yearly growth in earnings (in percent). A company with P/E 30 and 30% expected growth has a PEG of 1. Around 1 is considered fair: you pay for the earnings without overpaying for the growth.
Why P/E is not enough
A P/E of 30 sounds expensive. But if earnings grow 30% a year, the P/E in three years is only about 14 — at the same price. A P/E of 10 sounds cheap, but if earnings fall 5% a year it gets dearer every year. PEG allows for this by dividing by growth.
Example: P/E 24, expected growth 12% a year → PEG 2. You pay twice what the growth "justifies".
How to read it
- Below 1: The stock may be cheap relative to its growth — if the growth holds.
- Around 1: Fair.
- Above 2: You pay a lot for the growth. The market has to be right in its expectations, and then some.
The weak point is the word expected. The growth is an analyst estimate, and estimates are often wrong. For small companies there are often no estimates at all — and then there is no PEG either.
The typical beginner's mistake
Trusting PEG for a company whose growth estimate rests on one good year. 40% growth after a disaster year gives a lovely PEG — and says nothing about the next five years.
How you see it in Kiggo
Kiggo fetches PEG where it exists and lets it feed the long-term verdict — the "Long term (years)" ring on the stock page. If the figure is missing because there are no growth estimates for the company, Kiggo builds the verdict on the other accounting figures and says so.
Related terms
Frequently asked questions
Where does the growth estimate come from?
From analysts who follow the company and estimate the next 3–5 years of earnings. Large companies have many analysts; small ones often have none. That is why PEG mostly exists for large stocks.
Can PEG be negative?
Yes, if earnings are expected to fall. Then the number is useless — and the fall is the real message.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-07.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
