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    #1

    Question Trailing P/E ratio

    Hi,

    Anyone knows the difference:

    A. Earnings Per Share Trailing Twelve Months
    B. Earnings Per Share Last Four Quarters


    I need to calculate the Trailing P/E for a specified share/stock.

    According to http://www.investopedia.com/terms/t/trailingpe.asp, the Trailing P/E ratio is equal to "Current Share Price / Earnings Per Share Trailing Twelve Months".

    But I have a little confusion about the "last four quarters" and "trailing twelve months". Are they the same thing or different thing?

    Please help, thanks.

  1. Raymott's Avatar
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    #2

    Re: Trailing P/E ratio

    You might do better in an investment forum. Here's one:
    http://invested.com.au/

    There are plenty of others.

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    #3

    Re: Trailing P/E ratio

    Hi Raymott,

    Thanks for your suggestion. I will try it later.

    Could you help to have a look at the above link "http://www.investopedia.com/terms/t/trailingpe.asp"?

    It says "Trailing price-to-earnings (P/E) is calculated by taking the current stock price and dividing it by the trailing earnings per share (EPS) for the past 12 months".

    An then under section "BREAKING DOWN 'Trailing Price-To-Earnings - Trailing P/E'", it says "The P/E ratio is calculated by dividing a company's stock price by its earnings from the most recent fiscal year".

    It seems investopedia.com has mixed up the "the past 12 months" and "the most recent fiscal year". I think "the past 12 months" and "the most recent fiscal year" are not the same thing.

    Can you help to check? Thanks.

  2. Raymott's Avatar
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    #4

    Re: Trailing P/E ratio

    Yes, you are right - they are not the same thing. Nor is "the most recent four quarters". But did you read the whole page?
    In the last paragraph, it says:
    A disadvantage of the P/E ratio is that stock prices are constantly moving, while earnings remain fixed. Analysts attempt to deal with this issue by using the trailing P/E ratio, which uses earnings from the most recent four quarters rather than earnings from the end of the last fiscal year.

    I take this to mean that there are different ways to calculate the Trailing P/E ratio (with different results), and that economists do it this way (above).
    But the definition uses 12 months. This can be taken as the 12-month result from the last fiscal year, or - as economists do - the last four quarterly results, whichever quarters are most recent (ie. trailing). So, instead of getting one Trailing P/E ratio each year (Current Share Price/ 2015 fiscal year earnings), then (Current Share Price/ 2016 fiscal year earnings etc.) you get one each quarter - (Share Price / Jan+Apr+Jul+Oct), then (Share Price / Apr+Jul+Oct+Jan) etc.
    So, it's more up-to-date using the trailing quarters method. It's still 12 months, but it's four quarters - so the definitions are confusing, but not contradictory.
    Last edited by Raymott; 15-Jul-2016 at 13:20.

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    #5

    Re: Trailing P/E ratio

    PS: And to your initial question, I don't think you can tell just from the term "Trailing 12-month P/E ratio" whether they mean 12 monthly or four quarterly results. It can't be one yearly result, because that isn't trailing.
    Last edited by Raymott; 15-Jul-2016 at 13:18. Reason: spelling

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