Only 3 Mag 7 Stocks Pass Peter Lynch's Favorite Valuation Test

Only 3 Mag 7 Stocks Pass Peter Lynch's Favorite Valuation Test - Tesla Isn't One of Them

Surbhi Jain

May 19, 2025

Peter Lynch didn't need AI to beat the market – just a sharp eye for growth at a reasonable price. His favorite valuation test, the PEG ratio (P/E divided by earnings growth), helps separate true growth stocks from overhyped duds.

Under 1.0? That's a bargain. Over 2.0? You're overpaying.

So how do the mighty Mag 7 -- Apple Inc (NASDAQ:AAPL) , Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Microsoft Corp (NASDAQ:MSFT), Meta Platform Inc (NASDAQ:META), Nvidia Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA) – stack up?

Surprisingly, only three come close to making the cut. Amazon (PEG: 1.95) is borderline pricey, but its strong expected growth makes the valuation palatable. Nvidia (1.57) looks fairer than you'd expect, driven by breakneck earnings acceleration in the AI gold rush.

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Alphabet (1.44) quietly shines as the most Lynch-friendly of the bunch. A sub-20 P/E paired with double-digit earnings growth makes Google's parent look like the sleeper value in Big Tech.

The others? Not so much.

Microsoft (2.42) and Meta (2.48) offer solid growth, but their valuations are stretching the definition of “reasonable.” Apple's PEG of 4.04 reflects slowing growth and a sky-high multiple – an iconic brand, but hardly a Lynchian deal.

And then there's Tesla, which flat-out breaks the model. With a PEG of 9.84, earnings are shrinking even as the stock trades at a triple-digit P/E. It's not just overvalued by Lynch's standards – it's in another galaxy.

Only Amazon, Nvidia and Alphabet come close to passing Lynch's favorite valuation test. The rest of the Mag 7? Still dominant, still rich -- and still priced like the future is already here.

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Tesla Is 2025’s Biggest Mag 7 Bruise So Far, But Also The Only One Still In The Green

Photo: Shutterstock

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