Low PEG Ratio Stocks
100 stocks · Updated May 5, 2026
The PEG ratio (Price/Earnings-to-Growth) adjusts the P/E ratio for earnings growth rate, providing a more complete valuation picture for growing companies. A PEG below 1 is traditionally considered undervalued — you are paying less than $1 of P/E for each percentage point of growth. Developed by Peter Lynch, the PEG ratio is one of the most practical tools for identifying growth stocks that have not yet been fully valued by the market.
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Frequently Asked Questions
How is the PEG ratio calculated?
PEG = (P/E ratio) / (earnings growth rate). For example, a stock with a P/E of 20 and 20% earnings growth has a PEG of 1.0. A stock with a P/E of 15 and 30% earnings growth has a PEG of 0.5 — the second stock appears cheaper on PEG.
What PEG ratio is considered cheap?
A PEG below 1.0 is traditionally considered undervalued. Between 1-2 is fairly valued. Above 2 suggests the stock is priced at a premium to growth. These are rough guidelines — high-quality companies often sustain PEG ratios above 1.
What are the limitations of PEG ratio?
PEG is sensitive to which growth rate estimate is used (historical vs. forward). It doesn't account for balance sheet quality, capital intensity, or earnings quality. For very high-growth or very low-growth companies, PEG can give misleading signals.
How does PEG differ from P/E as a valuation metric?
P/E ignores growth — a 30x P/E on 30% growth may be cheaper than a 10x P/E on 0% growth. PEG captures this by normalizing P/E for the growth premium. This makes PEG particularly useful when comparing companies at different growth stages.