Trailing Price-To-Earnings - Trailing P/E
Definition of 'Trailing Price-To-Earnings - Trailing P/E'
The sum of a company's price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months. This measure differs from forward P/E, which uses earnings estimates for the next four quarters.
The trailing P/E ratio is calculated as follows:
Investopedia explains 'Trailing Price-To-Earnings - Trailing P/E'
This is the most commonly used P/E measure because it is based on actual earnings and, therefore, is the most accurate. However, stock prices are constantly moving while earnings remain fixed. As a result, forward P/E can sometimes be more relevant to investors when evaluating a company.