Reading Investment Valuation by Aswath Damodaran, there is a section that says that

in periods of rising earnings, the forward PE yields consistently lower values the the trailing PE, which, in turn, is lower than the current PE.

So, here, forward PE < TTM PE < current PE

This does not make sense to me. In a period of rising earnings (the PE denominator) we would have

(TTM) EBIT(t-k) < (current) EBIT(t0) < (forward) EBIT(t+k)

and since price (the numerator) is just the current market price, I would think the PE orders in a rising earnings situation go like

forward PE < current PE < TTM PE

Can anyone see what I am missing here?

  • I assume the current PE isn't calculated on the most recent data. therefore the ttm is more current (and thus lower).
    – xyious
    Jul 8, 2019 at 15:40
  • @xyious Not sure how these values are traditionally reported, but are you suggesting something like: current PE uses most recent annual data (eg. SEC Form 10K) while TTM PE uses sum of past 4 quarters (eg. something like the summed value of the four most recent SEC Form 10Q EBIT numbers)? Thus, in a rising earnings environment, the current PE's EBIT would actually be from further back in time than the TTM EBIT? Jul 8, 2019 at 19:46
  • Yes, that's what I would assume. current PE is last annual report, ttm is most recent data, forward PE is PE at the time of the next full year reported at previous full year
    – xyious
    Jul 8, 2019 at 21:00

1 Answer 1


From https://fitsmallbusiness.com/trailing-twelve-months-ttm-calculate/ we see

For quarterly reporting, simply take the last 4 quarterly values and add them together.

Granted, this is from a site for small businesses, but this is confirmed here as well (https://www.wallstreetmojo.com/ltm-ebitda/).

Since the current PE's EBIT is usually calculated from the most recent annual statement (eg. the SEC Form 10K), the chronology of the EBIT reporting times would be...

(current) EBIT(t0) < (TTM) EBIT(t-k) < (forward) EBIT(t+k)

so it then makes sense that

forward PE < TTM PE < current PE

in a rising earnings situation.

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