Home » Financial Dictionary » Forward P/E Ratio

# Forward P/E Ratio The forward P/E Ratio is similar to the standard price to earnings ratio, except that it uses estimated future earnings instead of past earnings.

While the normal P/E ratio looks at earnings over the previous 12 months, the forward P/E ratio looks at earnings over the next full year or next 12-month period.

For example, if a stock is trading at 200 dollars and predicted earnings for the next year are 10 dollars per share, then the forward P/E ratio is 20.

### Key Points

• A low forward PE ratio indicates that a stock is cheap relative to its future earnings.
• If the forward PE is lower than the normal (trailing) PE, that means earnings are expected to increase.
• This ratio relies on estimates and predictions, which are often wrong. It is not as accurate as the trailing PE ratio.
• Estimated next year's earnings are usually based on the average predictions of analysts that cover the stock.

## Forward PE Calculator

Fill in the fields above to calculate the forward PE ratio.

## How to calculate

Here's how to calculate the forward PE ratio:

1. Find the company's current stock price.
2. Find the stock's estimated earnings per share for the next year.
3. Divide the stock price by the forecasted earnings per share.

## Example

Apple's stock price is \$351. The predicted earnings per share for the next fiscal year are \$14.86. This gives Apple a forward PE ratio of:

\$351 / \$14.86 = 23.62