By VestAI Research | Last updated: March 2026
PEG Ratio: Meaning, Definition & Indian Stock Market Examples
PE divided by EPS growth rate — adjusts PE for expected growth.
What is PEG Ratio?
The PEG Ratio = PE Ratio ÷ Expected EPS Growth Rate. It adjusts the PE ratio for a company's expected earnings growth, making it easier to compare high-growth companies with slower-growth peers. A PEG below 1 is generally considered attractive; above 2 is expensive relative to growth.
PEG Ratio — Indian Stock Market Example
A company with PE of 30 and expected EPS growth of 35% has PEG of 0.86 — attractive. A company with PE of 20 but only 8% expected growth has PEG of 2.5 — expensive. In Indian small-cap growth stocks, PEG below 1 is often the entry trigger for growth investors.
Analyse any Indian stock using PEG Ratio
Ask Orion: “What is the PEG Ratio for [stock] and how does it compare to peers?”
Analyse with OrionFrequently Asked Questions about PEG Ratio
What growth rate should I use for PEG?
Most analysts use the 3–5 year projected EPS CAGR from analyst consensus estimates, or the most recent 3-year historical EPS CAGR. Using just one year's expected growth can be misleading if that year is unusually high or low.
What are the limitations of PEG ratio?
PEG is only as reliable as the earnings growth estimate, which can be wrong. It is less useful for cyclical companies with volatile earnings, or for companies that reinvest heavily and temporarily depress reported EPS. Use PEG as one input, not the sole criterion.
Related Terms
PE Ratio
Price divided by earnings per share — shows how much investors pay per ₹1 of profit.
Earnings Per Share
Net profit divided by total shares — profit attributable to each share.
Revenue Growth
Percentage increase in total sales versus a prior period.
Earnings Yield
EPS ÷ share price — the inverse of PE ratio, comparable to bond yields.
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