Forward PEG Ratio: formula and how to read it

Price vs. profit, adjusted for expected growth. Forward P/E divided by positive expected annual EPS growth in percentage points.

Stock Meadow groups it under Valuation, and shows it in tables as Fwd PEG.

Forward PEG = forward P/E ÷ expected annual EPS growth (in percentage points)

A stock with a forward P/E of 18 and expected earnings growth of 15% a year has a forward PEG of 18 ÷ 15 = 1.2. The numbers are made up for illustration.

A lower PEG means you pay less for each point of expected growth. A figure around 1 or below is often read as growth at a reasonable price, but that is a rule of thumb, not a guarantee.

When Stock Meadow ranks stocks, a lower figure scores better.

• The growth figure is a forecast. If analysts are too optimistic, the PEG looks better than reality.
• It is blank when earnings are expected to shrink or no forecast exists, because dividing by zero or negative growth is meaningless.
• A single growth number hides how long the growth is expected to last.

How Stock Meadow handles gaps. Usually blank when earnings are expected to shrink, or there's no earnings forecast.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Fixed-recipe models that score it: GARP (Peter Lynch).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

• P/E Ratio (Price-to-Earnings): what you pay for each dollar of profit.
• EPS Growth: how fast profit per share grew last year.
• Return on Invested Capital (ROIC): profit made on all money invested in the business.

What is a good PEG ratio?

A PEG of about 1 or below is often read as paying a fair price for growth, and lower is cheaper. It depends on how reliable the forecast is, so check the company's track record and compare with similar companies.

Why is the forward PEG blank for some stocks?

Stock Meadow only calculates it when expected earnings growth is positive. Companies expected to shrink, or without an earnings forecast, have no forward PEG.

Is a higher or lower Fwd PEG better?

When Stock Meadow ranks stocks, a lower figure scores better. That is a ranking convention, so read Fwd PEG alongside other measures and compare similar companies.

Why is Fwd PEG blank for some stocks?

It is usually blank when earnings are expected to shrink, or there's no earnings forecast. Stock Meadow leaves the figure blank rather than guessing it.