Forward price-to-earnings ratio

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.

Forward price-to-earnings ratio.

Stock analysts calculate a forward price-to-earnings ratio, or forward P/E, by dividing a stock's current price by estimated future earnings per share.

Some forward P/Es are calculated based on estimated earnings for the next four quarters. Others use actual earnings from the past two quarters with estimated earnings for the next two.

A forward P/E may help you evaluate the current price of a stock in relation to what you can reasonably expect to happen in the near future. In contrast, a trailing P/E is based exclusively on past performance.

For example, a stock whose price seems high in relation to the last year's earnings may seem more reasonably priced if earnings estimates are higher for the next year. On the other hand, the expectation of lower future earnings may make the current price higher than you are willing to pay.

References in periodicals archive ?
6, the S&P's forward price-to-earnings ratio is near its highest in four years and slightly under the long-term mean of 14.
For individual equities, Windows 8 users will be able to access a wide variety of Morningstar stock data through the Bing Finance app in 107 languages, from top-line general measures like market cap, trading volume, price range, and competitors; to more granular data such as debt-to-equity ratio, forward price-to-earnings ratio, and return on assets.
4% for the year ahead exceeds the forward price-to-earnings ratio of 23.
The stock's forward price-to-earnings ratio (P/E) for the current financial year (F1) is 14.
The forward price-to-earnings ratio for S&P utilities is at 14.
The firm indicated that Chinese shares had a forward price-to-earnings ratio of below 9 times; the world and U.
CSE competes with Singapore's Hup Soon Global , and has a 12-month forward price-to-earnings ratio of 9.
CI Capital said in a research note that Eastern Company had maintained a 4 percent four-year compound annual growth rate on revenues and 16 percent on earnings, and traded at a forward price-to-earnings ratio of 7.
Following the recent sharp rise in stocks, this leaves the US market trading on a forward price-to-earnings ratio of 21 times for this year and 19 times for next year, using our estimates.
Thanks to the recent run-up in the stock, it's now looking extremely pricey -- its forward price-to-earnings ratio is 17.
We then set year-end target levels for each of them, taking into account the target forward price-to-earnings ratio, consensus earnings growth, and adjusted for the macroeconomic view.
The S&P 500's forward price-to-earnings ratio sat at about 13 times at the beginning of 2013; it is now closer to 17, according to data.