Trailing P/E.
In plain English
Trailing P/E measures what buyers pay for one share against the profit that share already produced in the previous four quarters. You take the current share price and divide it by trailing twelve-month earnings per share. The answer is a multiple: how many dollars of price you are paying for one dollar of past profit. Because the earnings half is history, it cannot be nudged by optimism. That is both its strength and its limit, since a business changing fast can look cheap or expensive on results that no longer describe it.
01Why it matters
It is the one price multiple built entirely on reported results, so it shows what the market is paying for profit the company has already banked rather than profit someone hopes is coming.
02The math, step by step
A share trades at $60. Over the last four quarters the company earned $3.00 per share. $60 divided by $3.00 gives a trailing P/E of 20. If the price dropped to $45 and earnings held, the multiple would be 15.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
Forward P/E divides the same price by an estimate of the next twelve months of earnings. Trailing P/E uses earnings already filed. The two numbers can sit far apart on the same stock on the same day, and that gap describes expectations, not value.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice