What Is Forward P/E?

By Adam Levy – Updated Jul 2, 2025 at 12:00 AM EST

Key Points

Forward P/E ratio is calculated by dividing current share price by estimated future earnings per share.
To assess stock value, compare forward P/E ratios of similar companies within the same industry.
Forward P/E may be less useful for early-stage companies that have not yet achieved profitability.
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Forward P/E is a valuation metric that uses earnings forecasts to calculate the ratio of the share price to projected earnings per share. The "P" in forward P/E stands for price, or share price. The "E" stands for future earnings per share.

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An infographic defining and explaining forward P/E and the formula used to calculate it. — Image source: The Motley Fool

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Profit

The amount of money a business retains from sales after subtracting expenses, taxes, and other costs involved in operation.

Even when those companies start to make a profit, their relatively minuscule profits relative to the number of shares outstanding can lead to P/E ratios with triple or even quadruple digits. Those valuations aren’t useful for an investing thesis, and forward P/E falls flat in those cases.

Investors will be better off finding a different valuation metric to compare growth stocks that are still generating losses for investors. Just because they have extremely high or non-existent forward P/E ratios doesn’t make them bad investments.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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