The price-earnings ratio can be calculated as: Market Value per Share / Earnings per Share
There are three popular P/E calculations, trailing P/E and forward P/E, and the Shiller P/E.
Trailing P/E uses net income for the past 12-month period, divided by the number of common shares in issue during the period. This is the most common calculation used for P/E.
Forward P/E, instead of net income, uses estimated net earnings over the next 12 months in the future.<< Back to Glossary Index