The Price To Earnings Ratio  Trailing PE vs Forward PE Ratios  Summary and Q&A
TL;DR
Learn how to calculate trailing P/E ratios based on earnings per share (EPS) over the past 12 months, and forward P/E ratios based on estimated EPS for the next 12 months.
Questions & Answers
Q: How do you calculate the trailing P/E ratio?
The trailing P/E ratio is obtained by dividing the current stock price by the EPS value for the previous 12 months. It reflects the market's assessment of the company's recent performance and profitability.
Q: What is the formula for calculating the forward P/E ratio?
The forward P/E ratio is calculated by dividing the stock price by the estimated EPS value for the next 12 months. It helps investors gauge the market's valuation based on anticipated future earnings.
Q: What is the significance of the trailing P/E ratio?
The trailing P/E ratio provides insight into a company's historical valuation in relation to its earnings. A higher ratio suggests the stock is relatively expensive, while a lower ratio may indicate undervaluation.
Q: How is the forward P/E ratio useful for investors?
By using the forward P/E ratio, investors can analyze a company's potential growth and profitability. A lower forward P/E ratio compared to the trailing P/E ratio might indicate expected future improvement in earnings.
Summary & Key Takeaways

Trailing P/E ratio is calculated by dividing the current stock price by EPS value over the previous 12 months.

Forward P/E ratio is determined by dividing the stock price by the estimated EPS value for the next year.

Trailing P/E ratio represents the pricetoearnings ratio for the past 12 months, while forward P/E ratio provides a futureoriented pricetoearnings ratio.