Q: Good morning 5i.
I would appreciate 5i's comments on Forward P/E ratios published in major reporting entities like Globe Investor.
Are these based on consensus analyst projections of forward earnings? Do the forward earnings forecasts exclude large non-recurring transactions (that could flip a 'real' 22 Forward P/E projection into a more attractive looking 11?
In summary, what advice would 5i have on the above, and how much should one take an "attractive looking" forward P/E into consideration when thinking about a stock?
Thank you.
I would appreciate 5i's comments on Forward P/E ratios published in major reporting entities like Globe Investor.
Are these based on consensus analyst projections of forward earnings? Do the forward earnings forecasts exclude large non-recurring transactions (that could flip a 'real' 22 Forward P/E projection into a more attractive looking 11?
In summary, what advice would 5i have on the above, and how much should one take an "attractive looking" forward P/E into consideration when thinking about a stock?
Thank you.
5i Research Answer:
Most entities (but not all) use foward adjusted earnings for P/E estimates. These will typically be based on consensus estimates as an average of all analysts following the company. Most analysts will exclude one-time items in their adjusted estimates. But often one-time items are repeated, so some care needs to be taken. Also, at this time of year, some will still use 2025 estimates and some will flip to 2026 estimates. Generally, if there is an outlier (too high, too low) on a P/E it is worth the time to drill down and see if there is a logical explanation and not just assuming it is accurate.