Question

For the P/E valuation model does current EPS mean the last reported EPS or should you...

For the P/E valuation model does current EPS mean the last reported EPS or should you find out todays EPS? and is projected growth of EPS just found by averaging out historical growth (say 5 years worth)?

Homework Answers

Answer #1

Price/ Earnings Ratio model describes that how much the investors are willing to pay for the earnings the company has generated. Now in P/E model valuation EPS is calculated on the period end date so it has to be the last reported Earnings (either quarterly or annually) and then divide the earnings with weighted average shares outstanding. Projected EPS is calculated once the growth is considered for the future and it is done by averaging out the historical growth rate (could be trailing 5 years or trailing 3 years).

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