[original post removed]
Predicted P/E or Forward P/E is the P/E that is expected to be in future as per the estimates of the analyst. Ofcourse, the reliability thereof depends on the efficiency with which the estimates for price and earnings have been computed.
Trailing P/E is the one which is based on historical data, and is therefore a more accurate number.
Hope this helps!
Forward P/E = Current Price/Estimated Earnings.
It helps with the comparison of companies, however as heyitsme mentioned, it’s subject to the accuracy of the earnings estimates.
Stock A current price = $10, trailing 12 month eps = $1. Trailing P/E = 10. Estimated earnings are $1.5 for the next year. Forward P/E = 6.67.
Stock B current price = $10, trailing 12 month eps = $1. Trailing P/E = 10. Estimated earnings are $1 for the next year. Forward P/E = 10.
All else equal between the two companies and based on forward p/e what stock looks like it should appreciate and which should depreciate? So, sure, trailing P/E undoubtedly is “more accurate” because you can function off of historical earnings, but Forward P/E takes a different stance and uses projections to find discrepancies in forward-looking stock valuations.