Trailing Price-to-Earnings (Trailing P/E)
Definition of 'Trailing Price-to-Earnings (Trailing P/E)'
To calculate the TTM P/E, you divide a company's current share price by its TTM EPS. For example, if a company's current share price is $100 and its TTM EPS is $5, then its TTM P/E is 20.
The TTM P/E is often used to compare companies in the same industry. A company with a high TTM P/E is considered to be more expensive than a company with a low TTM P/E. However, it is important to note that the TTM P/E is only one factor to consider when evaluating a company. Other factors, such as a company's growth prospects and financial health, should also be taken into account.
The TTM P/E can be used to identify companies that are undervalued or overvalued. A company with a TTM P/E that is lower than its industry average may be considered to be undervalued. Conversely, a company with a TTM P/E that is higher than its industry average may be considered to be overvalued.
The TTM P/E can also be used to track a company's valuation over time. If a company's TTM P/E is increasing, it may indicate that investors are becoming more bullish about the company's future prospects. Conversely, if a company's TTM P/E is decreasing, it may indicate that investors are becoming more bearish about the company's future prospects.
The TTM P/E is a useful tool for investors, but it should be used in conjunction with other valuation metrics to get a more complete picture of a company's value.
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