The PEG ratio (Price/Earnings To Growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth.

PEG = PE / Earnings Per Share Growth (e)
Example : The PEG (year N+1) is calculated by using PE (year N+1) divided by estimated EPS Growth between year N+1 and year N+2.
Consensus estimates calculated by FactSet are based on estimates that have been validated via broker research within the past 100 days.

In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rate.