When Peter Lynch ran Fidelity Magellan from 1977 to 1990, he delivered a 29.2% annualized return — turning every $10,000 invested at the start into more than $270,000 by the time he retired. He didn't get there with a quant model or a black-box screen. He got there with a chart simple enough to draw by hand on a single page of the S&P Stock Guide.
That chart — the now-famous Peter Lynch Chart — is one of the most enduring tools in value investing. Today we're rolling it out, fully automated for every public company on Earth, at gurufocus.com/peter-lynch-chart.
What is the Peter Lynch Chart?
The Peter Lynch Chart is a deceptively simple visualization that overlays two lines on the same plot:
- The earnings line — earnings per share multiplied by 15, plotted over time
- The price line — the actual share price over the same window
Why fifteen? In One Up on Wall Street, Lynch wrote that "the P/E ratio of any company that's fairly priced will equal its growth rate." For the kind of steady-grower business he favored — the stalwarts compounding 10–15% a year — that meant a fair P/E of around 15. The earnings × 15 line therefore traces what Lynch would call fair value at every moment in history. The textbook Peter Lynch fair value formula falls right out of it: Fair Value = EPS × 15.
The technique is straightforward:
- When the price line drops well below the earnings line, the stock may be undervalued.
- When the price climbs well above, it may be overvalued.
- When the two lines overlap closely, the stock is roughly fairly valued by Lynch's standard.
Here's Lynch in his own words from page 164 of the book:
"A quick way to tell if a stock is overpriced is to compare the price line to the earnings line. If you bought familiar growth companies — such as Shoney's, The Limited, or Marriott — when the stock price fell well below the earnings line, and sold them when the stock price rose dramatically above it, the chances are you'd do pretty well."
That is how Lynch found his ten-baggers. He hunted for the moments when good companies were trading well below their earnings line — and walked away when they ran far above it.
Why we automated it
Lynch drew his charts by hand from the S&P Stock Guide — a $4 paperback that fit in his briefcase. He had to do it manually for every company he tracked. That work used to be a competitive moat: most investors simply didn't bother.
Now you don't have to. The new GuruFocus Peter Lynch Chart automates the same comparison for every public company on Earth, refreshed daily with current financials.
What's on the page
For any ticker, you get:
- A 15-year Peter Lynch Chart — the earnings × 15 line overlaid on the actual share price, on a logarithmic scale (with a linear toggle) so percentage moves of equal size look the same regardless of price level
- Side-by-side fair value comparison — Lynch's textbook earnings × 15 calculation against GuruFocus's proprietary **GF Value**, each with a clear verdict (undervalued / fairly valued / overvalued)
- Annual rates — 10-year, 5-year, and 12-month growth rates for EPS, revenue, and free cash flow, all visible above the chart
- Real-time updates — refreshed daily as prices and fundamentals change
How to use it
1. Visit gurufocus.com/peter-lynch-chart
2. Look at the chart: where is the price line relative to the earnings line?
3. Check the verdict table below the chart: does Peter Lynch's method agree with GF Value?
4. When the two methods agree, the signal is strongest
When to adjust the multiple
Lynch did not believe in a one-size-fits-all P/E. In One Up on Wall Street he grouped companies into six categories, each warranting a different multiple:
- Slow growers: ~10×, Mature, low-growth businesses (utilities, established industrials) earn a lower premium
- Stalwarts: (medium growers) , ~10–15× , Reliable large-caps growing 10–12% a year — the typical Lynch sweet spot
- Fast growers: ~15–25× , Companies compounding earnings 20%+ deserve a richer multiple, often near their growth rate (PEG ≈ 1)
- Cyclicals: varies sharply, Multiples expand at the trough and compress at the peak — the inverse of how it looks at a glance
- Asset plays: not applicable, Value lies in hidden assets, not earnings-multiple snapshots
- Turnarounds, not applicable, Use only after earnings recover; before that the chart is misleading
A slow grower trading "below the P/E = 15 earnings line" may actually be fairly valued at P/E = 10. A fast grower trading "above the P/E = 15 line" may still be cheap relative to its growth rate. Use the chart as the first pass; categorize the business as the second.
While we're excited about this new feature, we recognize that there's always room for improvement. We encourage you to open a support ticket if you have any questions.
