Forward Price to Earnings (redirected from Forward Price-to-Earnings Ratios)

Forward Price to Earnings

The price of a security per share at a given time divided by its projected earnings per share over the coming year. A forward P/E ratio is a way to help determine a security's stock valuation (that is, the fair value of a stock in a perfect market). It is also a measure of expected, but not realized, growth. See also: P/E, PEG.

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Forward Price to Earnings (Forward P/E)

What Does Forward Price to Earnings (Forward P/E) Mean?

A measure of the price-to-earnings ratio (P/E) that uses forecasted earnings to calculate the P/E. Although the earnings used in the calculation are just estimates and thus are not as reliable as current earnings data, there is still a benefit in forward P/E analysis. The forecasted earnings used in the formula can be for the next 12 months or for the next full-year fiscal period. It is calculated as follows:

Also referred to as estimated price to earnings.

Investopedia explains Forward Price to Earnings (Forward P/E) The estimated forward P/E of a company often is used to compare current earnings to estimated future earnings. If earnings are expected to grow in the future, the estimated P/E will be lower than the current P/E. This measure also is used to compare one company to another with a forward-looking focus.

Related Terms:
• Earnings
• Earning per Share—EPS
• Gearing Ratio
• Price-Earnings Ratio—P/E Ratio
• Price/Earnings to Growth Ratio—PEG Ratio