So company earnings can fluctuate quite a bit, based on the market conditions, seasonal conditions, whether there was a big spend in the last year etc.
Therefore, even the last years earnings could differ quite a lot from this year.
So I was wondering like when we work out the P/E ratio, which set of earnings is used? Is it the real annual earnings from last year? Or is it the latest estimates of what the earnings will be? And who makes these estimates? Is it the market commentators or the company saying "we'd expected to make this much"?
One example I can think of is with BHP. I've been looking at their P/E ratio and it has been around 8 for the past few months.
Yesterday, they announced that profit fell
35% following the news of 'BHP Mothballs Expansion' smh.com.au
As suggested in the linked article, this news was not a surprise and even beat "Market Consensus" (which is what?) by a little bit.
So I guess in this example, as the P/E ratio did not just jump
35% on that news so that suggests to me that the p/e had already taken this news into account even before it was announced. If so, where are these numbers coming from?