Peter Lynch Fair Value

Peter Lynch fair value is a heuristic, not a valuation model: it says a growth stock is fairly priced when its P/E equals its earnings growth rate, so fair value = growth rate x EPS. A company growing earnings 20% a year with $2.50 in EPS gets a fair value of 20 x $2.50 = $50 — the price at which its PEG ratio is exactly 1.0.

The idea traces to Lynch's One Up on Wall Street (1989) and the "Lynch chart" that plots price against an earnings line at 15x EPS; when price dips below the line, the stock is cheap by this rule of thumb. Popular screeners formalized the growth-rate version and attached his name to it.

Treat the output as a sanity check, nothing more. The rule breaks below roughly 10% growth (a 5% grower is not worth 5x earnings) and above roughly 25% (hypergrowth rates do not persist long enough to capitalize), and Lynch himself paired it with story, balance sheet, and category checks rather than using the ratio alone.