Coincidence

I'm not sure where I got this info but I jotted down a quick note in my elan guide (and it wasnt from there, obviously) that if Earnings are expected to grow/ increasing, the leading P/E will be < than Trailing.

Again not sure where I got this from but there was a question on the CFAI mock asking which PE is larger based on the figures given and I just guessed it based on the assumption above, without the calc and it was the correct answer

Is this alway's the case or was it a coincidence? Question # 88 CFAI Morning Session.

Edited 1 time(s). Last edit at Thursday, May 27, 2010 at 02:15AM by njlevel10610.

chetan86

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2^#

发表于 2011-7-11 18:17 | 只看该作者

I think it is a coincidence that you got that question correct. If a company that is expected to experience negative earnings growth in the future, the trailing P/E will be lower than the leading P/E. This is because its present earnings are greater than its future earnings.

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JGovender

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发表于 2011-7-11 18:17 | 只看该作者

Just found where I got that statement from. Volume 5 CFAI book-bottom of pg 199.

Does that make sense to you, esp with the answer on the mock exam?

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Bluetick1010

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发表于 2011-7-11 18:17 | 只看该作者

I doubt if its a co-incidence. (unless i am missing something)

Forward P/E ratio = Px Per Share / Earnings per share in next year

If earnings are expected to rise & Px Per Share is constant, P/E Ratio will decrease, compared to current one..

If Market Price - 10$ / share ; current earnings = 2$ / share ; expected earnings = 5$ / share

Forward P/E = 2 ; Trailing P/E = 5.

It'll work other way round for negative earnings i guess.

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