Putting the E Back in P/E Ratios

The Valuation Examiner, pp. 24-27, December 2003

4 Pages Posted: 14 May 2006

Abstract

While analysts provide an important source of information in today's markets, they also offer an array of confusion when their commentary is followed with a reference to a relatively simple valuation metric; the price earnings ratio. In bull markets, analysts appear prophetic for their knowledgeable forecast and valuation becomes a matter of what color fairy dust the analyst prefers. However, in bear markets, investors question why their foresight failed.

This paper considers the impact that 'Street' earnings (pro forma or operating earnings) have on price earnings multiples. A relatively simple calculation of the P/E ratio can differ dramatically when pro-forma earnings become part of the equation.

Keywords: P/E Ratio's Pro Forma Earnings

Suggested Citation

DiGabriele, James A. and Eisner, Alan B, Putting the E Back in P/E Ratios. The Valuation Examiner, pp. 24-27, December 2003, Available at SSRN: https://ssrn.com/abstract=900626

James A. DiGabriele (Contact Author)

Montclair State University ( email )

Upper Montclair, NJ 07043
United States
973 655 7288 (Phone)

Alan B Eisner

Pace University ( email )

One Pace Plaza
New York, NY 10038
United States