Understanding P/E Ratio numbers

papisito

Hi

I wondered if the clever people on this board could help me with PE ratios as used on the MorningStar site.

For example, if you look at Vodafone, the PE ratio on the 'Overview' page is 8.77 but on the 'Key ratios' page is 11.61. They're both, as far as I can tell, are PE ratios but vastly different numbers.

I have a feeling the difference is one is forward looking, one is backward looking but it isn't clear. Can anyone enlighten me?

P

m0n3y_3

I don't know about the MorningStar site, but PE ratios can use historical earnings data (trailing PE), or use forward earnings estimates (forward PE ratio or estimated PE ratio)
http://www.investopedia.com/terms/f/forwardpe.asp
http://www.investopedia.com/terms/t/trailingpe.asp

JamesU

papisito wrote: »

Can anyone enlighten me?

The first, price to earnings ratio, p/e=8.77 is the p/e calculated as: latest share price/EPS (where EPS is earnings per share, from latest financial results)

The second, is the forecasted prospective earnings ratio, PER(E)=11.61, same calculation as above but based on estimated future results (think the expectation from next two quarterly accounts which are then extrapolated to the next 12 months).

Easier to see past, present and estimated future p/e on digitallook though, more data there. Also includes good data on past/estimated eps growth which is useful. Just look at VOD and "financials" on the site.

JamesU

Theyarv1

don't forget, trailing p/e is accurate but not necessarily useful, forward p/e is a guess but what you should be basing your investments on (your own forward p/e that is)
gl