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 ?
On the market side, the stocks were heavily oversold trading at forward price-to-earnings ratio of 5 times which was 11-year low.
He pointed out that the KSE-100 index was trading at the forward price-to-earnings ratio of 7.51, which represented a discount of 41.8% over the average of regional peers.
Further, he noted that Seagate trades at a "greater than two turn premium" on forward price-to-earnings ratio relative to peers Western Digital (WDC) and Micron (MU).
The forward price-to-earnings ratio on the MSCI Emerging Markets Index is currently around 13 times, compared to 17 times for large-cap US equities.
The S&P 500 is trading at a forward price-to-earnings ratio of 17.6%, ranking in the 89th percentile since 1976.
HSBC, which has an "underweight" rating on Indian equities, says 12-month forward price-to-earnings ratio of 15.9 times represents a 50 per cent premium to Asia excluding Japan.
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.
He added that he would not be concerned about valuation until the S&P's forward price-to-earnings ratio was 17 and its trailing P/E was 20.
Apple's forward price-to-earnings ratio would fall to 11.65 from 12.02, bringing it further below the 13.02 average P/E of its peers.
With a forward price-to-earnings ratio near 8, the stock seems appealingly valued.
Chinese bank shares are the cheapest in the Asia-Pacific region with a 12-month forward price-to-earnings ratio of 4.8, and the third cheapest in the world after Argentina and Bahrain, according to Thomson Reuters Starmine data.