Is it better to look at forward or trailing P/E ratios?
Best Answer
127 points
pauljbass answered one year ago …
I'll let the pros answer this more precisely, but the short answer is both. Because trailing P/E tell you what happened last interval, in the past, while forward P/E is a projection of future earnings for the next interval, relative current price.
Current low prices make trailing P/E look pretty good, the problem is future earnings are also more unreliable during these market downturns.
Answers
2222 points
readytoretire answered one year ago …
I prefer trailing. It is what it is and unless they decide to restate their finances, the numbers don't change. The problem with forward P/E is that they can be off due to the market, or due to a bad guess on the company. Most numbers quoted are forward P/E. In todays market, the number looks high even though the stock is beaten up. The thing you need to look at is have they changed their guidance on earnings. If not, their P/E may be overly optimistic.
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