Below is a definition and explanation of various financial metrics as used in yahoo finance on Ford Motor Company as at full year 31st December 2013.
Trailing P/E
Trailing P/E is a total of a given company’s price to its earnings, which is normally calculated by taking the prevailing stock price in the market at that time and subsequently dividing it by the stock’s trailing earnings for each share over a period of the past one year. The financial ratio (trailing P/E ratio) is arrived at as follows:
Trailing P/E Ratio = Current Share Price
Trailing earnings per share for the last twelve months
It is based on real rather than estimated or projected earnings making it the most commonly applied ratio in financial analysis. It is by far the best way to value a security i.e the fairest value of a certain security in a perfect market condition setting.
In the details presented in yahoo finance on Ford Company, the trailing P/E of 10.87 means that if the status quo of the firm was to remain exactly as it is over the long haul, it would take a shareholder who buys the stock today, approximately 10.87 years to recoup his investment holding all other factors constant and assuming all earnings by the company are distributed as dividends for the period.
Forward P/E
The price to earnings ratio may be measured by the use of forecasted earnings. The earnings used are estimates and not as reliable as current data available but they can be of benefit in the long run financial analysis of a given security. The earnings commonly used are either for the next financial year or for the next twelve months.
Forward P/E = Market Price Per Share
Expected earnings per share
In the case of Ford Company according to yahoo, the trailing P/E is 10.27. This means that due to expected rise in earnings as depicted by future earnings estimates, a shareholder who buys Ford shares today will take approximately 10.27 years to recoup his investments in form of dividends assuming that all other factors are held constant including growth in earnings. There is also the assumption that the company will give all its earnings in the next ten years out as dividends.
References
Yahoo Finance (2013) FORD
Retrieved from: http://finance.yahoo.com/q/ks?s=FORD+Key+Statistics
