The sum of a company's price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months. This measure differs from forward P/E, which uses earnings for the next four quarters.
The trailing P/E ratio is calculated as follows:
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This is the most commonly used P/E measure because it is based on actual earnings and, therefore, is the most accurate. However, stock prices are constantly moving while earnings remain fixed. As a result, forward P/E can sometimes be more relevant to investors when evaluating a company.
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Learn what the price/earnings ratio really means and how you should use it to value companies. Understanding The P/E Ratio
The math may be simple, but to make informed investment decisions, investors need to understand the many varieties of EPS and what each represents. Types Of EPS
