Terms

  1. Home
  2. Terms
  3. Valuation
  4. Forward P/E Ratio

Forward P/E Ratio

Parent term
Valuation
The Forward P/E Ratio compares today's prices with an estimate of next year's earnings

  • a high forward p/e suggests that stocks are expensive



Forward P/E Ratio Criticisms

  • Tends to be a poor gauge of market prices
  • The forward P/E is based on estimates of future earnings.  Why pay for something that is an estimate vs. something known (historical earnings)
  • Earnings tend to be cyclical. At the end of cycles forward earnings estimates may be way off if instead earnings drop

Warnings and Disclaimers

The information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal financial situation - we are not investment advisors nor do we give personalized investment advice. The opinions expressed herein are those of the publisher and are subject to change without notice. It may become outdated an there is no obligation to update any such information.

Copyright Finnotes.org © 2018 - 2020