What It Is, What It Tells You
What Is Forward Price-to-Earnings (Forward P/E)?
Forward price-to-earnings (forward P/E) is a version of the ratio of price-to-earnings (P/E) that uses forecasted earnings to calculate the ratio. Although these earnings estimates aren’t as reliable as current or historical earnings data, forward P/E analysis may still offer valuable insights to investors.
P/E ratios vary significantly by sector due to differences in growth rates, risk profiles, and capital structures specific to each industry. For instance, regional banks, which tend to have stable earnings, typically have a forward P/E of around 16. In contrast, the healthcare information and technology sector, driven by rapid innovation and higher growth expectations, has a…
