What does a forward PE ratio mean?

Take for example, Nasdaq composite companies' forward PE ratio are lower than the current PE ratio, does that mean that Nasdaq companies are expected to make more money in the next twelve months (compared to the past twelve months).

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Wilson Nid A Break

02 May 2020

The Forward Price to Earnings (PE) Ratio is similar to the price to earnings ratio. The regular P/E ratio is a current stock price over its earnings per share. The forward P/E ratio is a current stock's price over its "predicted" earnings per share. If the forward P/E ratio is lower than the current P/E ratio, it indicates increase in expected earnings.

Formula

Forward PE = current stock price / predicted next annual earnings period

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Samuel Don Oh

02 May 2020

Hey there! It is actually a version of the PE ratio, exept with forecasted earnings instead. So everything is speculative. It has to be used with the training PE ratio for a better gauge of a customer fundamentals :)

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