The trailing price-to-earnings (P/E) ratio is a relative value multiple based on actual earnings over the previous 12 months. It’s computed by dividing the current stock price by the trailing earnings per share (EPS) for the previous 12 months. In contrast to the trailing P/E, the forward P/E calculates the price-to-earnings ratio using expected future earnings.
A trailing P/E ratio is a helpful tool for standardizing and comparing relative share prices across time periods and firms. Though often used, trailing P/E has limitations in that previous profits may not correctly reflect the company’s current or future earnings position.
Trailing price-to-earnings (P/E) is calculated by taking the current stock price and dividing it by the trailing earnings per share (EPS) for the past 12 months. This measure differs from forward P/E, which uses earnings estimates for the next four quarters. As a result, forward P/E can sometimes be more relevant to investors when evaluating a company.
Trailing PE = Current share price / Last twelve months EPS,
OR
= Current market cap / Last twelve months earnings