Price-To-Earnings PE Ratio Definition Wednesday, December 5, 10:54 AM ET
The P/E ratio is a measure of a company's valuation. It is calculated by dividing the share price by the earnings per share (EPS). Trailing P/E uses the her share net income for the most recent year, divided by the weighted average number of shares. Trailing P/E uses operating earnings in the calculation, which exclude discontinued operations earnings, one time items, and changes in accounting. Forward P/E uses estimates for the next months months in the calculation.
The average U.S. equity P/E ratio from 1900 to 2005 is 14.
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