Financial Encyclopedia
Forward P/E
Definition
Forecast P/E - a ratio that reflects the ratio of the company's market capitalization to its forecasted profit for the period.
Example
In order to draw a more accurate conclusion when using the forecast P/E, it should be considered together with historical P/E.
For example, if the forecast P/E is below the current P/E ratio, then the company's earnings are expected to rise in the future.
More detailed
Forecast P/E = Current share price / Future earnings per share
Forecast P / E is calculated using analyst forecasts or using financial models.
It is believed that using the Forecast P/E helps identify undervalued companies more effectively than using the standard P/E ratio.
However, the profit used in the formula is only an estimate and may not be as reliable as current and historical profit data.
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