Fundamental Glossary / Valuation Ratios
Forward P/E Ratio
Price divided by the earnings analysts or the company expect over the next twelve months, or the next fiscal year.
Formula
Current price per share / expected earnings per share.
What it means
Forward P/E looks ahead. It is useful when last year's profit is a poor guide, for example after a launch, a cycle trough, or a one-time loss.
The denominator is an estimate, not a reported number. Different forecasts produce different forward multiples for the same price.
How to read it
A forward P/E below the trailing P/E usually means earnings are expected to grow. The gap is only attractive if the forecast is credible and the company has a record of meeting it.
What to watch
Estimates are revised. A ratio that looked inexpensive can become expensive after a profit warning, even if the share price does not move. Read the date and source of the earnings estimate.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.