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Sean HymanSean Hyman
Keymaster
Post count: 3919

Trailing P/E is what it did in the past year. It’s importance is that’s “for sure” earnings that came in (in the recent past) vs the stock price. The advantage of the forward P/E is that it’s the P/E off of the “expected” or “anticipated” earnings going forward vs. the price. So, it’s more important if they’re accurate about their projections.

During this weird time of COVID, some companies have dismissed their forward guidance because of it being a bit more difficult to call. However, judging the P/E’s is most important to me on the first/original investment. It tells me whether I should be entering the stock in the first place. And once I’m in, as long as its not weak fundamentally, then I’m fine with the other two tranches going in. CAJ is solid. So I’m fine with averaging downs on it.

Back to the P/E’s, the forward P/E is the most important as long as their projection is accurate. Why? It’s looking into the future to see what they should do, going forward, rather than what they’ve done in the past in earnings. With the forward P/E being cheaper than the trailing P/E, they’re saying they should earn more money relative to its present stock price. These low levels probably won’t last long. So if you’re considering buying a 3rd tranche, you should go ahead and do it. What I think it’s going to do has already been stated on the most recent Thursday video though. That still stands. Hope this has been helpful.