Forward and Trailing P/ETTM
Trailing P/E divides the share price by earnings over the past twelve months; forward P/E uses analysts’ estimates for the next twelve months. Forward P/E depends on forecasts that may prove wrong.
Trailing and forward P/E are two versions of the price-to-earnings ratio. Trailing P/E uses profits already reported over the past year; forward P/E uses analysts' estimates for the year ahead. Comparing the two shows how much growth the market expects.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 3 min
- Also called
- Forward P/E, Trailing P/E, TTM P/E
- Updated
Forward and trailing P/E in plain words
The P/E ratio helps you judge whether a share price looks high or low compared with its own history or with other companies.1
Trailing P/E uses earnings per share from the last 12 months; forward P/E uses forecasts for the next 12 — and each has pros and cons.2
Those forecasts come from analysts, who estimate earnings and revenue for upcoming quarters and years.3
How to calculate both
Take the price
Use the current share price.
Get trailing EPS
Work out earnings per share: the last 12 months of earnings divided by shares outstanding.1
Compute trailing P/E
Divide the share price by that EPS figure.1
Get forward EPS
For the forward version, use analysts' earnings estimates for the coming 12 months.2
Compute forward P/E
Divide price by forward EPS.
Compare
A forward P/E below the trailing one implies expected growth; check it against peers.1
Worked examples
Example 1 — Growth expected
Growth priced inHypothetical price $60, trailing EPS $3, forward EPS $4.
| Trailing P/E | 20 |
| Forward P/E | 15 |
Price divided by current EPS gives the trailing figure; the lower forward P/E shows analysts expect profits to grow.1
Example 2 — Falling profits
Value trap riskHypothetical price $40, trailing EPS $4, forward EPS $2.
| Trailing P/E | 10 |
| Forward P/E | 20 |
The stock looks cheap on past earnings, but next year's estimates point lower, which lifts the forward P/E.2
Example 3 — TTM label
It is trailingA hypothetical quote page shows P/E (TTM) 18.
| Label | TTM |
| Meaning | Trailing 12 months |
TTM stands for trailing 12 months.2
Trailing vs forward P/E
| Aspect | Trailing P/E | Forward P/E |
|---|---|---|
| Earnings used | Past 12 months, reported | Next 12 months, estimated |
| Reliability | Factual | Depends on forecasts |
| Strength | Objective | Forward-looking |
| Weakness | Backward-looking | Estimates can be wrong |
Where each is used
Valuation screens
Compare the Price-to-Earnings Ratio across peers.
Growth checks
Gap between the two shows expected Earnings growth.
Earnings season
Forward P/E shifts when estimates change after results.
Market-level analysis
Index P/Es help judge broad valuation in Fundamental Analysis.
Advantages and disadvantages
Advantages
- Simple to compute.
- Trailing uses real reported data.
- Forward reflects expected changes.
- Easy to compare across peers.
Disadvantages
- Forward relies on estimates.
- Trailing ignores what comes next.
- Both fail when earnings are negative.
- One-off items distort EPS.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Mixing the two
Compare trailing with trailing, forward with forward.
Trusting estimates blindly
Forecasts are often revised.
Ignoring sector norms
Typical P/E levels differ by industry.
Using negative EPS
The ratio has no useful meaning then.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Both divide price by EPS.
- Trailing uses the past 12 months.
- Forward uses estimates for the next 12 months.
- Forward below trailing implies expected growth.
- Estimates can change quickly.
Frequently asked questions
Which is better?
Why is forward P/E often lower?
Where do forward estimates come from?
Further learning
- Price-to-Earnings Ratio
The base ratio.
- Earnings per Share
The denominator.
- Earnings
What drives the ratio.
- Fundamental Analysis
Where valuation fits.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Price-Earnings (P/E) Ratio (glossary) (opens in a new tab) Checked .
- Charles Schwab. What Is the P/E Ratio? Why Investors Use It (opens in a new tab) Checked .
- FINRA. What Is Earnings Season? (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.