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Glossary · PSX term

Forward P/E.

Forward P/E divides the share price by expected future earnings per share rather than past earnings.

Definition

It uses analyst or company forecasts to value a stock on where profits are heading, which matters for growing or recovering companies. Because it relies on estimates, it is only as good as the forecast.

Worked example

If a stock trades at Rs. 120 and next year's EPS is forecast at Rs. 15, the forward P/E is 8x.

Related on PSX Clarity

Term
Price-to-earnings ratio
Term
Earnings per share
Term
PEG ratio

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