Your comments
Hi Daniel,
The first thought I have is this should be looked at from the point of view of the consumer of the data. The forward P/E ratio of 166 (now 154) may be correct, according to the rules used to calculate it. But it is fairly useless information for a reader, and even worse, it is likely misleading. That is not a desirable situation.
For the financial models I have developed I took on board Michael Boyd's suggestion to publish both historical and projected non-GAAP P/E ratios to get a truer comparison between past and projected ratios (see my article https://seekingalpha.com/article/4222814-archer-daniels-midland-risk-opportunity ). The large tax adjustments at December 31, 2017, for most companies, have distorted ttm GAAP results throughout 2018, making them useless for comparison purposes. I agree with not using future quarterly estimates because of a different mix of analysts. There is a further distortion due to the various analysts giving different weightings to quarters. So the "high" analyst for a year could also have the "low" estimate for a particular quarter.
I would recommend you resolve this by publishing 2 forward P/E ratios - FY 2018 non-GAAP P/E (FWD) and FY 2019 non-GAAP P/E (FWD). To me that is useful, actionable information and there is absolute clarity. SA can set the standard here - others will almost certainly follow.
If anyone would like a free no obligation trial of my 1View∞Scenarios™ financial models please PM me and I will arrange.
Customer support service by UserEcho
Hi Daniel,
That is a hard one.
What you do need to be careful with is being consistent, So for AT&T (T) you presently show an EPS (FWD) of $3.50, a P/E (FWD) of 8.68, and a share price of $29.67 ($29.42 yesterday). But 8.68 X $3.50 equals $30.38 and $29.42 divided by $3.50 = 8.41. So the EPS and P/E ratio quoted are not consistent.
Well that has given me time to reflect further on your question. Is a forward P/E useful if I cannot see how it compared to the current P/E? I might prefer to just see the current P/E on the default page if there is only room for one.
But assuming, you wish to show a forward P/E then I might prefer to see the current year forward P/E shown at the beginning of the fiscal year. That might change after the 2nd or 3rd qtr earnings release at which time start showing the following fiscal year P/E. The important thing would be to ensure clear labelling of which fiscal year the P/E relates to.