What does a forward P/e mean for stocks?

Question

I am not sure about this meaning in the stock market

This seems a little like an oxy-moron- when you think about it if it is shaky to invest in a future belief of the share per earnings..then it should be shaky to base your investment in a current PE; just becuase the PE looks good now does not mean in the future the company will do good, which is becasily the point of why you say I should stay away from the forward PE to judge my descion. Forward or or current PE is still a gamble either way it sounds to me

Answer 1

P/E is Price /Earnings per share. Normally the EPS is taken as last declared year or trailing 12 months EPS. Forward EPS is the projected EPS for next year. When Forward EPS is taken in calculating P/E, it is called forward P/E.

Answer 2

First, you must define P/E. This is price per earnings and it is determined simply by divinding the current stock price for one share by the current year's earnings per share. This ratio has been an outstanding "quick and easy" indicator of valuation for stock analysis for decades. Forward P/E is the current stock price for one share divided by the PROJECTED earnings per share for the upcoming year. This ratio is NOT very dependable...because no one can predict accurately the future earnings of a company. I find that talking heads often use forward P/E's to justify their current touts...when they don't have anything more substantial to use. I'd be leery of relying very much upon future P/E's in determining estimated stock valuations. Current P/E's are much more reliable. And, remember, P/E analysis should just be one of many criteria you look at when analyzing a potential stock investment.

Answer 3

Foward P/E is a sales gimmick. It's numbers they might have literally pulled out of a hat. To get that number, they need to know the price of the stock weeks or months into the future along with their net income. That's just not possible so that's why I say not to use forward P/Es.