P/E Ratio vs PEG Ratio: Which One Finds Better Value in 2026?

The P/E ratio vs PEG ratio question comes down to one thing: whether growth is included in the price. As of June 26, 2026, Nvidia (NVDA) traded at 29.4 times trailing earnings but only 0.27 times its trailing earnings growth, while Meta Platforms (META) looked cheaper on P/E at 20.0 times but far more expensive on PEG at 3.4 ^[1]. In 2026 the PEG ratio has found better value among fast growers, but it breaks down when earnings growth is inflated by one-time gains or is unlikely to repeat. This article explains both ratios and applies them to six large companies with current numbers.

What the P/E ratio and the PEG ratio measure

The price-to-earnings (P/E) ratio divides the share price by earnings per share. A trailing P/E uses the last four reported quarters. It answers a simple question: how many dollars an investor pays for one dollar of annual profit. Its weakness is that it says nothing about where profit is going.

The PEG ratio divides the P/E ratio by the earnings growth rate, expressed as a whole number. A P/E of 30 with 30 percent growth gives a PEG of 1.0. A common rule of thumb treats a PEG near 1.0 as fairly priced, below 1.0 as inexpensive relative to growth, and above 2.0 as expensive. The rule is crude, but it forces the analyst to ask what growth rate justifies the multiple.

All figures below use closing prices from DataPorium's price history and trailing twelve-month (TTM) net income from the four most recent quarterly statements available in the DataPorium stock screener, with growth measured against the prior four quarters ^{[1] [2]}.

P/E ratio vs PEG ratio for six large companies as of June 26, 2026

The ranking flips depending on the ratio. On P/E alone, Meta and Microsoft look like the value choices and Apple and Nvidia look expensive. On PEG, Nvidia and Microsoft screen as the cheapest relative to growth, and Meta becomes the most expensive name in the group ^[1].

Nvidia: a high P/E that PEG explains

Nvidia's quarter ended April 26, 2026 showed revenue of $81,615 million, up 85 percent from $44,062 million a year earlier, and diluted EPS of $2.39 against $0.76 ^[5]. Four quarters of net income now sum to about $159.6 billion, compared with $76.8 billion in the prior four quarters, a gain of 108 percent ^{[1] [5]}. A trailing P/E of 29.4 is high against the broad market, but a PEG of 0.27 says the market is not paying for that growth to continue. Investors may consider that the PEG is only as good as the assumption that growth persists; a slowdown to 30 percent growth would lift the PEG to about 1.0 without any change in price.

Where the PEG ratio misleads: Alphabet, Coca-Cola and Meta

Alphabet is the clearest warning. Its first quarter of 2026 reported net income of $62,578 million and diluted EPS of $5.11, versus $34,540 million and $2.81 a year earlier ^[6]. But the filing also discloses a gross unrealized gain of $36,660 million on non-marketable equity securities that flowed through other income ^[6]. Strip that gain out and DataPorium's normalized income for the quarter is roughly $32.7 billion ^[2]. On that basis Alphabet's trailing earnings are closer to $130 billion, growth is about 17 percent rather than 44 percent, the trailing P/E rises to about 32, and the PEG rises from 0.58 to about 1.8 ^{[1] [2]}. The PEG looked attractive only because a one-time item was counted as growth.

Coca-Cola shows a second problem. Trailing net income grew 27 percent, which produces a PEG of 0.96. Yet revenue in the March 2026 quarter grew 12 percent and net income grew 18 percent year over year, and a consumer staples company rarely compounds profit at 27 percent for long ^[2]. If an analyst substitutes a sustainable 8 percent growth rate, the PEG becomes about 3.2 and the stock looks fully priced at 26 times earnings. The growth input matters more than the formula.

Meta is the mirror image. Trailing net income of about $70.6 billion grew only 6 percent because one quarter in late 2025 delivered net income of just $2.7 billion despite $20.5 billion of operating income ^[2]. The depressed base drags the trailing growth rate down and pushes the PEG to 3.4, even though the March 2026 quarter posted net income of $26.8 billion, up 61 percent from a year earlier ^[2]. A forward PEG built on a normalized base would tell a very different story.

How to use both ratios in a 2026 screen

Neither ratio should be used alone. A practical sequence for investors is:

1. Start with the trailing P/E to see what the market is paying today, and compare it with the company's own five-year range and with peers.
2. Check the quality of the earnings in the latest 10-Q: look for unrealized gains, tax items or one-time charges that distort the base, as in Alphabet's and Meta's cases ^[6].
3. Compute the PEG twice, once with trailing growth and once with a conservative sustainable rate, and only trust it when both readings agree.
4. Confirm that revenue growth supports the earnings growth. Apple's March 2026 quarter grew revenue 17 percent to $111,184 million and EPS 22 percent to $2.01, a consistent pair ^[3]; Microsoft grew revenue 18 percent to $82,886 million and EPS 23 percent to $4.27 ^[4].

Apple and Microsoft are the cleanest cases in the table. Apple's PEG of 1.31 at a 34.1 P/E reflects a premium for stability, and Microsoft's PEG of 0.75 at a 22.2 P/E reflects a share price that had fallen toward its 52-week low by late June while profit kept growing ^[1]. Investors who favor lower multiples may prefer Microsoft's profile; those who want growth at a reasonable price may look at Nvidia's PEG but should stress test it.

The PEG ratio finds better value than the P/E ratio only when the growth rate in the denominator is real, repeatable and confirmed by revenue.

Key takeaways

• As of June 26, 2026, Nvidia (P/E 29.4, PEG 0.27) and Microsoft (P/E 22.2, PEG 0.75) screen cheapest on PEG among the six companies reviewed.
• Meta has the lowest P/E in the group at 20.0 but the highest PEG at 3.4 because a weak quarter in late 2025 depressed trailing growth.
• Alphabet's PEG of 0.58 is distorted by a $36.7 billion unrealized gain; on normalized earnings it is closer to 1.8.
• Coca-Cola's 27 percent trailing profit growth is unlikely to persist; a sustainable growth input lifts its PEG above 3.
• Use the P/E to measure price, the 10-Q to check earnings quality, and the PEG only with a growth rate you can defend.

Frequently asked questions

Is a PEG ratio below 1 always a good sign?

No. A PEG below 1 can result from a temporary jump in earnings, such as an unrealized investment gain or a recovery from a weak year. It is a good sign only when the growth rate is likely to continue and is supported by revenue growth.

Which is better for value investing, P/E or PEG?

The P/E ratio is better for comparing price across stable, slow-growing companies, while the PEG ratio is more useful for growth companies where a high P/E may be justified. Most analysts use both together rather than choosing one.

What growth rate should be used in the PEG ratio?

Trailing growth is easy to verify but can be distorted; forward estimates are more relevant but less certain. A conservative approach is to calculate the PEG with both and to prefer the higher result when making decisions.

Where can I find P/E and earnings growth data for U.S. stocks?

Trailing and forward P/E, EPS and growth figures for more than 38,000 tickers are available in the DataPorium stock screener, and the underlying quarterly statements can be checked against the company's 10-Q on SEC EDGAR.

Sources & References

1. [1] DataPorium Stock Screener
2. [2] DataPorium Stock Market Analytics
3. [3] Apple Inc. Form 10-Q for the quarter ended March 28, 2026 (SEC EDGAR)
4. [4] Microsoft Corporation Form 10-Q for the quarter ended March 31, 2026 (SEC EDGAR)
5. [5] NVIDIA Corporation Form 10-Q for the quarter ended April 26, 2026 (SEC EDGAR)
6. [6] Alphabet Inc. Form 10-Q for the quarter ended March 31, 2026 (SEC EDGAR)