How to Master Peg Ratio Stock Screener [Step-by-Step Guide]
A peg ratio stock screener finds stocks where the price-to-earnings ratio is justified by the rate of earnings growth. The PEG ratio divides P/E by the annual EPS growth rate. A PEG of 1.0 means you are paying one dollar of P/E for every percentage point of growth. Below 1.0, the growth more than covers the price. Peter Lynch popularized the rule that a PEG under 1.0 signals undervaluation. The screener automates this calculation across thousands of stocks so you can act on the signal rather than compute it manually.
This guide walks through how to configure the ValueMarkers screener to find peg ratio opportunities, what to do with the output, and where the metric breaks down.
Key Takeaways
- The PEG ratio adds a growth dimension to the raw P/E, making it more useful for companies that are expanding earnings at 15%+ per year.
- A PEG below 1.0 is a starting threshold, not a buy signal. Quality and balance sheet checks must follow.
- The metric is meaningless for negative-growth companies and unreliable for cyclical businesses where EPS swings violently by year.
- Microsoft (MSFT) trades at P/E 32.1 with ROIC of 35.2%. If earnings grow at 15% annually, its PEG sits near 2.1, which is high. If growth accelerates to 20%, the PEG drops to 1.6. Growth rate assumptions drive the answer.
- The ValueMarkers screener lets you toggle between trailing EPS growth and forward consensus growth, which produces very different PEG outputs for the same stock.
- Combining a PEG under 1.5 with a debt-to-equity below 1.0 and a current ratio above 1.5 eliminates most of the risky names the raw PEG would otherwise surface.
How the PEG Ratio Is Calculated in the Screener
The formula is: PEG = (P/E ratio) / (Annual EPS growth rate in percent).
If a stock has a P/E of 20 and EPS is growing at 20% per year, PEG = 20/20 = 1.0. If EPS is growing at 10%, PEG = 20/10 = 2.0. Same price, same earnings, but slower growth produces a worse PEG.
The screener offers two growth inputs. Trailing growth uses the actual EPS change from the prior year compared to the year before that. Forward growth uses analyst consensus estimates for the next twelve months. Trailing growth is more reliable because it reflects reality. Forward growth is more useful for evaluating companies in a genuine acceleration phase.
| Growth Rate Input | Best Used For | Risk |
|---|---|---|
| 1-Year Trailing EPS Growth | Mature, stable earners | Distorted by one-time items |
| 3-Year Trailing EPS CAGR | Businesses with steady expansion | Slower to respond to change |
| Forward EPS Growth (Analyst Consensus) | High-growth, pre-earnings-inflection names | Analyst estimates are often wrong |
| 5-Year Projected CAGR | Long-duration investments | Increasingly speculative beyond 2 years |
Step-by-Step: Using the Peg Ratio Stock Screener
Step 1: Select your universe.
Open the ValueMarkers screener and choose your exchange or region. The PEG ratio is most meaningful for companies with at least three years of earnings history. Filter to a minimum market cap of $1 billion to ensure liquidity and to avoid the micro-cap names where analyst estimates are often unavailable or unreliable.
Step 2: Set the PEG upper bound.
Peter Lynch's original rule was PEG below 1.0 for a "fairly valued growth stock." In practice, 1.0 is a strict threshold that excludes many quality businesses. Set the upper bound at 1.5 for a broader initial screen. If your universe is exclusively high-quality businesses with ROIC above 20%, a PEG up to 2.0 can still represent reasonable value.
Step 3: Set the P/E range.
The PEG ratio loses meaning for very low P/E stocks because low P/E often reflects low growth or business deterioration, not cheapness. Set a minimum P/E of 8 and a maximum of 35. This focuses the screen on companies where earnings growth is a real factor in the valuation, not just a statistical artifact.
Step 4: Add a debt filter.
Set debt-to-equity below 1.0. High-growth companies with heavy debt are fragile when growth disappoints. The interest cost eats into the earnings that justify the PEG ratio calculation. A current ratio above 1.5 adds a liquidity check, confirming the business can fund its growth without distress.
Step 5: Sort by PEG ascending.
The lowest PEG stocks in your filtered list are the ones where earnings growth most significantly exceeds what the P/E alone would suggest. Start here and read each company's most recent earnings report before considering further action.
Where the PEG Ratio Breaks Down
The PEG ratio fails in four well-documented situations.
Cyclical companies inflate the PEG metric. An oil company that earned $3 per share last year but $8 per share this year at a commodity price peak shows 167% EPS growth. Its PEG collapses to near zero. That is not a buying opportunity; it is a warning that earnings are at the cycle peak and will contract.
Negative or zero growth breaks the formula entirely. A stock with a P/E of 15 and 0% growth produces an undefined or infinite PEG. The screener handles this by excluding stocks with negative or near-zero growth from PEG results, but you should verify this when reviewing output.
Small companies with no analyst coverage often lack forward estimates. The screener falls back to trailing growth in these cases, which can be distorted by a single unusual year.
R&D-heavy companies in biotech or technology often suppress reported earnings by expensing research costs immediately. A biotech with P/E of 40 and 10% earnings growth shows PEG of 4.0, but the actual intrinsic growth in its pipeline may be far higher. The PEG is not the right tool here; DCF analysis is.
PEG Ratio Benchmarks by Sector
Different sectors have different natural PEG ranges because growth rates and typical P/E multiples differ by business type.
| Sector | Typical P/E Range | Typical Growth Rate | Typical PEG Range |
|---|---|---|---|
| Technology | 22 to 40 | 12% to 25% | 1.2 to 2.5 |
| Consumer Staples | 18 to 28 | 4% to 8% | 2.5 to 5.0 |
| Healthcare | 15 to 25 | 8% to 15% | 1.2 to 2.5 |
| Financials | 8 to 13 | 5% to 10% | 1.0 to 2.0 |
| Industrials | 14 to 22 | 6% to 12% | 1.5 to 2.8 |
| Consumer Discretionary | 18 to 30 | 10% to 20% | 1.2 to 2.5 |
A PEG of 1.2 in consumer staples is rare and may signal genuine undervaluation. A PEG of 1.2 in technology is common and represents fair value at best. Context is everything.
Combining PEG With the VMCI Score
The ValueMarkers VMCI Score weights five pillars: Value (35%), Quality (30%), Integrity (15%), Growth (12%), and Risk (8%). The PEG ratio inputs into both the Value and Growth pillars simultaneously.
A high VMCI score with a PEG below 1.5 is the most actionable combination the peg ratio stock screener produces. The VMCI confirms quality and integrity; the PEG confirms you are not overpaying for growth. Apple (AAPL) with ROIC of 45.1% would need to maintain very high earnings growth to justify its current P/E near 28.3 from a PEG perspective.
Run the PEG screen first to generate candidates, then check the VMCI score for each output. Candidates with VMCI above 65 and PEG below 1.5 form a short list worth a full hour of fundamental research.
Further reading: SEC Investor.gov · FINRA
Why peg ratio filter Matters
This section anchors the discussion on peg ratio filter. The detailed treatment, formula, and worked examples appear in the body of this article above. The points below summarize the most important takeaways for value investors who want to apply peg ratio filter in real portfolio decisions. ValueMarkers exposes the underlying data on every covered ticker via the screener and stock profile pages, so the concepts in this article translate directly into actionable filters.
Key inputs for peg ratio filter
See the main discussion of peg ratio filter in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using peg ratio filter alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Sector benchmarks for peg ratio filter
See the main discussion of peg ratio filter in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using peg ratio filter alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
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- Wisesheets Alternative Why Valuemarkers Offers More — related ValueMarkers analysis
- Gurufocus Undervalued Stocks — related ValueMarkers analysis
- Free Advanced Stock Screener — related ValueMarkers analysis
- Marketwatch Watchlist — related ValueMarkers analysis
- Stock Screener Sharpe Ratio — related ValueMarkers analysis
Frequently Asked Questions
what happens if the stock market crashes
When markets crash, PEG ratios across growth stocks spike sharply because share prices fall while near-term earnings estimates also get cut, often at the same time. The double compression makes growth stocks look expensive on PEG even after significant price declines. Value stocks with naturally low P/E and moderate growth tend to have more stable PEG ratios through corrections, which is why the peg ratio stock screener often surfaces different names during bear markets than during bull markets.
what time does the stock market open
U.S. equity markets open at 9:30 a.m. Eastern Time on regular weekdays. The PEG ratios displayed in the ValueMarkers screener are calculated using end-of-day closing prices, so the figures update after 4:00 p.m. Eastern each trading day. Pre-market price moves can shift P/E and therefore PEG before the official session opens, but the screener's numbers reflect the previous official close until the new close is recorded.
are stock markets closed today
U.S. markets observe ten federal holidays per year, including Christmas, Thanksgiving, and Independence Day. On those days the screener still displays data from the most recent trading session. For international exchanges covered by ValueMarkers, holiday schedules vary by country, so you may see data for one exchange while another is closed. The screener flags stale data with a timestamp so you know when prices were last updated.
what time does the stock market close
NYSE and NASDAQ close at 4:00 p.m. Eastern Time on regular trading days. The PEG ratio calculations in the screener lock in at the 4:00 p.m. closing price. After-hours trading can move prices significantly, but these moves are not reflected in screener calculations until the following day's close. This is why a screen run at 6:00 p.m. Eastern may show different-looking candidates than one run at noon the next day after a significant after-hours earnings release.
when does the stock market open
The NYSE and NASDAQ open at 9:30 a.m. Eastern Time. International markets in the ValueMarkers screener open according to their local schedules: the London Stock Exchange at 8:00 a.m. GMT, the Frankfurt exchange at 9:00 a.m. CET, and Asian markets like the Tokyo Stock Exchange at 9:00 a.m. JST. The screener aggregates closing data from each exchange after its local session ends, so global PEG comparisons always use the most recent official close per market.
why is the stock market down today
Markets fall when interest rate expectations rise (which compresses P/E multiples and therefore changes PEG ratios for all stocks simultaneously), when corporate earnings miss estimates (which raises the denominator in the PEG calculation), or when broad risk-off sentiment causes investors to sell equities regardless of fundamentals. The peg ratio stock screener is particularly useful after broad declines because growth stocks with strong businesses often see their PEG ratios improve significantly, creating genuine entry points that did not exist at higher prices.
Run your first peg ratio stock screener search at ValueMarkers. Filter to PEG below 1.5, P/E between 8 and 35, debt-to-equity under 1.0, and a minimum market cap of $1 billion. The output gives you the growth-adjusted value opportunities worth your research time.
Written by Javier Sanz, Founder of ValueMarkers. Last updated April 2026.
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