How does Morningstar.com come up with their P/E?

Question

What formula do they use so that I can run my own formula? Or do they have a downloadable spreadsheet?

Answer 1

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple".

Answer 2

You will get various numbers from various sources. Some are dynamically calculated (with every price change that is reported), some periodically calculated (like at the last earnings announcement, etc). Morningstar, and most, take the last earnings figure and calculates it by the most current price at the time of the report.

You can look up a company's reported earnings, divide it by the number of shares outstanding and arrive at the earnings per share. Then you divide that by the current price to give you the price to earnings ratio.

Answer 3

Companies report their earnings on a quarterly basis. Take the last 4 quarters total and divide by the current stock price to get PE.

The reason why different websites have different ratios is because of the difference between GAAP figures and non-GAAP figures. GAAP earnings don't include all those stock options and etc, so they give a much higher PE figure. Some analysts think we should use non-GAAP figures, which usually give much lower PE figures.