Homework Answers
Solution:-
12-month forward PE ratio= Price/12 month forward eps
12 month forward EPS is calculated by calculating EPS attributable to the next 12 months starting from 1st Dec 2019. This is done by using 1 month EPS out of Q4 2019 EPS and adding that to first three quarters EPS of 2020 as well as 2 months EPS out of Q4 2020 EPS.
12 month forward EPS= Earnings from 1st Dec 2019 to 30th Nov 2020 = (Q4 2019*1/3) + Q1 2020 + Q2 2020 + Q3 2020 + (Q4 2020*2/3)
12 month forward EPS= (0.35*1/3) + 0.43 + 0.48 + 0.50 + (0.59*2/3)
12 month forward EPS= 0.117 + 0.43 + 0.48 + 0.50 + 0.393
12 month forward EPS= 1.92
Thus,
12-month forward PE ratio= Price/12 month forward eps = $20/$1.92 = 10.42 times
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