Forward · Trailing
Calculating a metric from past results makes it trailing; calculating it from future estimates makes it forward — the same PER has a different value depending on which one is used.
Trailing = calculated from results already in the past (e.g. the trailing 12 months, TTM)
If the forward metric looks considerably better than the trailing one, that reflects an expectation that "earnings will grow a lot ahead.
In plain terms
To calculate a metric like PER, you need "earnings" — and which period's earnings you use splits things into two types. If you use results that have already happened, that's trailing; if you use estimated future earnings, that's forward.
For example, trailing PER is based on "earnings actually made over the past year," while forward PER is based on "earnings expected to be made this year (or next year)." Even with the same share price, the value changes depending on which earnings you divide by.
What it tells you
Trailing is "what actually happened," so it's certain, but it's the past. Forward carries the future because it's "expectations ahead," but it's an estimate and can miss. The two trade certainty for forward-looking information.
For a growing company, future earnings are expected to be larger, so forward PER usually comes out lower than trailing PER (because the estimated earnings in the denominator are larger). Looking at the gap between the two gives a glimpse of how much growth the market expects from that company.
Formula
Trailing = calculated from results already in the past (e.g. the trailing 12 months, TTM) Forward = calculated from expected future results (analyst estimates)
What high or low means
If the forward metric looks considerably better than the trailing one, that reflects an expectation that "earnings will grow a lot ahead." Whether that expectation turns out to be right is a separate matter.
Estimates (forward) differ by analyst and change often. So a forward metric is not a settled fact but a current expectation.
Forward metrics are estimates, so they can be wrong. A low forward PER resting on rosy estimates can make "the multiple look low," but if those estimates miss, the meaning disappears. Forward numbers always carry an "estimate" tag.
Trailing is certain but backward-looking, so for a company whose business changed sharply of late, trailing metrics may not keep up with reality. Both have limits, and they speak about different points in time.
Even a metric with the same name has a different value depending on whether it's forward or trailing. Mixing the two in a comparison leads to off-base conclusions (PER and similar figures on our screens and in this glossary are on a trailing TTM basis).
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.