Forward vs. Trailing P/E Ratios



Value investors like to sort stocks by trailing P/E ratios and
focus only on the lowest P/E quartile as they believe that stocks that have low valuations in relation to
trailing earnings, on average, outperform high P/E stocks. Other investors, however, like to use forward
P/E ratios to identify outperforming stocks going forward. But which metric has a better predictive power
as far as stock returns are concerned, trailing or forward P/E ratios? Do low P/E quartile stocks yield
higher or lower return visavis
high P/E quartile stocks when P/E is defined based on trailing or forward
earnings? There is no doubt that low P/E stocks (however defined) beat high P/E stocks. Evidence in this
regard is overwhelming. Low P/E stocks outperform high P/E stocks by between 6% and 13% depending
on the country. This outperformance, on average, holds steady over different time periods, as well as
during recoveries/recessions and bear/bull markets. Nevertheless, there is no much evidence as to which
stocks do better, those that have low forward P/E or low trailing P/E.


历史PE与预测PE哪一个更靠谱 看完这篇论文你就知道了