Comparing Forward P/Es

As the year draws to a close, I am starting to keep an eye how my holdings have performed over the year, and more importantly, what the 2014 outlook looks like. The current market conditions seem to suggest that stocks are fair-to-overvalued. But looking at the analyst estimates and the forward earnings guidance could possibly shed some more light on how my holdings are valued for the year forward.
A Forward P/E is the measure of the price-to-earnings (P/E) ratio using forcasted earnings. The Forward P/E could be for the forward 12 months period or for the next full-year fiscal period. Note that these are merely estimates and guidance and are not an accurate measure as it is not reliable data compared to the current earnings data. Nevertheless, my portfolio’s P/E and Forward P/Es are listed below including the current and 5-yr average yields.

Company Name
 5-yr Avg
Archer Daniels Midland ADM $41.60 18.65 12.88 1.83% 2.30%
BCE Inc BCE $46.53 16.36 14.81 5.01% 5.10%
Chevron CVX $122.78 10.04 10.32 3.26% 3.30%
CHS Inc CHSCP $29.57 6.76%
Cineplex CGX $42.40 21.75 20.51 3.40%
IAMGold Corp IMG $4.32 16.74 16.33 6.09% 1.70%
Inter Pipeline Ltd IPL $25.52 5.05% 6.40%
Johnson & Johnson JNJ $95.06 21.21 16.29 2.78% 3.30%
Medtronic Inc MDT $57.36 15.33 14.06 1.95% 2.20%
Omega Healthcare OHI $32.29 23.38 20.85 5.95% 7.20%
Qualcomm QCOM $73.65 18.84 13.13 1.90% 1.60%
RioCan REIT REI.UN $24.82 8.32 5.68% 6.30%
The Bank of Nova Scotia BNS $65.42 13.00 12.02 3.79% 4.00%
The Jean Coutu Group PJC.A $18.18 9.42 15.14 1.87% 1.90%
The Southern Company SO $40.73 22.16 14.69 4.98% 4.70%
Thomson Reuters TRI $39.28 37.23 19.70 3.46% 3.50%
Wells Fargo & Co WFC $44.31 11.67  11.07 2.71% 2.10%
The difference in the P/E and Forward P/E gives us a clue if the stock is currently under or overvalued as per the earnings estimates. From the lot, only Chevron (CVX) and The Jean Coutu Group (PJC.A) have a Forward P/E less than the current P/E. On the other end of the scale with the largest difference between current P/E and Forward P/E, we have Thomson Reuters (TRI), The Southern Company (SO), Archer Daniels Midland (ADM) and Qualcomm (QCOM). I will be digging deeper into the analyst estimates, forward guidance statements of these four equities to consider adding to my position.
What are your thoughts on Forward P/E? Do you ever consider this metric in your investing decisions?
Disclosure: Long all positions mentioned here.

10 thoughts on “Comparing Forward P/Es

  1. I look at forward P/E’s in my analysis but it’s just piece of the puzzle. As you mentioned, it’s based off guidance and estimates of things to come so it’s hard to take to heart. As long as it’s not completely out of whack then it’s pretty good. I was surprised to see some of the large forward P/E splits like with ADM and QCOM. JNJ has a pretty big difference too, guess they’re expecting quite a bit of growth. I can’t remember if any of the recall overhang is still on the books for the trailing P/E or not so that could explain the big difference.

    • PIP,
      I am not sure either if the JNJ FP/E have taken the recent developments into account.
      Both ADM and QCOM have had quite a runup recently, but looks like its still decently valued with both P/E in the 18s. Luckily, those are the sectors I am currently underweight in; and could use with further capital deployment for a balanced portfolio.

    • D-S,
      For all the securities, the numbers in the table indicate the current price against future earnings (hence the ‘Forward’ P/E).

      In case of JNJ, the trailing earnings for the year were $4.48/share. The future (estimated) earnings are $5.85, which reduces the P/E number…as the earnings rise.

      The values quoted here are taken from

      Hope that helps. Best wishes.

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