Why P-E ratios differ for the same stock

March 7, 2008

I've noticed that a stock can have different price-earnings ratios depending on which sources I consult. Why is that?

I've noticed that a stock can have different price-earnings ratios depending on which sources I consult. Why is that?

A stock's P-E ratio-its current market price per share divided by the company's earnings per share-can vary depending on whether the calculation factors in earnings reported in past months (trailing earnings), an estimate of future earnings, or a combination of both. Newspapers typically use 12 months of trailing earnings, for instance, and so does Morningstar. But Value Line uses trailing earnings for the most recent six months plus estimated earnings for the next six months. When evaluating stocks, just be sure that any sources you use perform the P-E calculation the same way, so you get an apples-to-apples comparison. The source's website or printed materials should include an explanation of how it defines a P-E ratio.