justified trailing P/E

CFA Level II
#1

justified trailing P/E : is it P0/E0, where P0 is current stock price, E0 is last year end earnings? if it is justified leading P/E , what is the timming of P and E we should use? Thank.s

#2

I think leading P/E is P0/E1 which is next years expected earnings. And trailing P/E is P0/E0 which is the beginning of the years earnings.

#3

when we could add " justified" to it? Reggie Wrote: ------------------------------------------------------- > I think leading P/E is P0/E1 which is next years > expected earnings. And trailing P/E is P0/E0 which > is the beginning of the years earnings.

#4

Not too sure man, I thought it’s always said “justified” and I’ve never seen a question about whether its “justified” or “unjustified”. Do you have a specified question from somewhere?

#5

current price over current EPS also use [d0(1+g)/E0] / r - g

#6

which is the same as: (1-b)(1+g) / (r-g)

#7

Justified P/E = (1-b)/(r-g) this is a forward P/E, i.e. P0 / E1 Not sure how you’d turn that into trailing PE other than reduce the denominator by (1-g) So given that E1 = E0 (1+g) --> E0 = E1 / (1+g) P0/E0 = P0 / (E1 / (1+g)) = P0 (1+g) / E1 = (P0/E1)(1+g) Trailing Justified PE = (Forward Justified PE) * (1+g) = (1-b)(1+g) / (r-g) As Reggie pointed out.

#8

Justified Trailing P/E = [payout ratio x (1+g)]/r - g Justified Leading P/E = payout ratio/r - g

#9

The reason why it’s called justfied is that it’s derived from the intrinsic value analysts calculated. you can also think of it as “implied” si tu veux.