The forward version of the price-earnings (P/E) ratio. The forward P/E relates a stock’s current price to its “predicted”/ “forecasted” earnings per share (EPS). This ratio helps investors assess the price to be paid for each monetary unit of a company’s projected earnings. As a forward multiple, it takes into account the future or forward profitability of a company (typically, over the next 12 months). For a growing business, it shall always be lower than the trailing P/E due to the fact that expected earnings must exceed current or historical earnings. Otherwise, the company would be perceived as a business experiencing a deteriorating profitability.
It is also known as a leading P/E.
