PEG ratio by industry

When investors want to compare valuation against growth, the PEG ratio is one of the most widely used metrics. The PEG ratio builds on the traditional P/E ratio by adjusting it for earnings growth, helping investors understand whether a stock's valuation looks rich or reasonable relative to its growth profile. Because growth expectations vary widely between industries, average PEG ratios can also differ meaningfully from one industry to another.

In its simplest form, the PEG ratio is calculated by dividing a company's P/E ratio by its earnings-per-share growth rate. On Full Ratio, PEG is based on the current P/E ratio and one-year EPS growth.

As a rule of thumb, a PEG ratio around 1 is often interpreted as valuation that is broadly in line with growth expectations. A higher PEG ratio can suggest investors are paying a premium relative to growth, while a lower PEG ratio can imply stronger growth relative to valuation. However, PEG should always be interpreted in the context of industry norms, because growth durability, cyclicality, and earnings quality vary significantly across sectors.

Average PEG Ratio by Industry

The average PEG ratio varies significantly by industry. Here is a table showing average PEG ratios by industries in the US as of Jun 2026:

As shown in the table, the Industrial Distribution industry has the highest average PEG ratio of 2.42, followed by Utilities - Diversified at 2.33. In contrast, the Advertising Agencies industry has the lowest average PEG ratio of 0.04, followed by the Other Precious Metals & Mining industry at 0.07. This variation reflects differences in expected growth, cyclicality, earnings visibility, and the valuations investors are willing to pay in each industry.

Industries with highest PEG ratio

Industries with the highest PEG ratio are shown in the following chart and table. You can further filter the industries by sector in the chart below, so you can see a breakdown of the industries with the highest PEG ratio in each sector.

Industries with lowest PEG ratio

Industries with the lowest PEG ratio are presented in the following chart and table. Within the chart below, you can also refine the industries by sector, allowing you to observe a breakdown of the industries with the lowest PEG ratio in each sector.

It's important to compare a company's PEG ratio to the average PEG ratio for its industry. If a company's PEG ratio is higher than the industry average, it may indicate that investors are assigning a premium valuation relative to the company's earnings growth. Conversely, if a company's PEG ratio is lower than the industry average, it may suggest that growth is strong relative to valuation. Still, extremely low or negative PEG ratios can be caused by temporary swings in earnings growth, so they should be validated with a broader review of profitability, margins, and the quality of the underlying growth.

Industry Sectors and Characteristics

Some industries tend to have higher PEG ratios than others because investors expect a long runway of earnings growth and are willing to accept richer valuations to access that growth. Other industries trade at lower PEG ratios when growth is steadier, more cyclical, or more exposed to commodity prices and macroeconomic swings.

There are several industry sectors, each with unique characteristics that impact the PEG ratio. For example:

• Technology companies often command higher PEG ratios because investors expect sustained innovation and above-average earnings growth.
• Healthcare and biotechnology industries can show a wide range of PEG ratios because growth expectations can change quickly with trial results, patent cycles, and regulation.
• Consumer staples and utilities often trade at more moderate PEG ratios because their earnings growth is generally steadier but less explosive than high-growth sectors.

Macroeconomic conditions also matter. Higher interest rates can compress valuation multiples and reduce the premium investors are willing to pay for future growth. In slower economic periods, growth expectations may be revised lower, which can push PEG ratios higher even if share prices remain stable. That is why PEG ratio analysis works best when combined with an understanding of the broader business cycle.

How to Interpret PEG Ratio

The PEG ratio is most useful when investors want to compare companies that have different growth rates but operate in a similar market. A company with a higher P/E ratio may still look reasonably priced if its earnings are expected to grow much faster than its peers. In that sense, PEG can provide more context than P/E ratio alone.

That said, PEG depends heavily on the quality of the growth number used in the formula. Growth that comes from a depressed earnings base, one-time items, or cyclical rebounds can make PEG ratios appear unusually low. Likewise, a temporary slowdown in earnings can cause PEG ratios to spike even when the long-term business outlook remains intact.

Limitations of PEG Ratio

While the PEG ratio is a useful valuation metric, it also has several limitations. It assumes that earnings growth is a reliable indicator of future performance, even though growth may prove volatile or unsustainable. It also says little about balance sheet strength, free cash flow generation, or the capital intensity required to support future growth.

For that reason, PEG ratio should not be used as the sole factor when making investment decisions. Investors should also consider industry structure, competitive advantages, margins, debt levels, and cash flow quality when judging whether a company's valuation is attractive relative to its growth outlook.