REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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PER
(Price-earnings ratio)
The PER expresses
the current share price as a multiple of normalised
earnings per share. The PER is calculated using the latest
price shown in the top right-hand corner of the entry.
EPS are based
on estimated future results, when available, in which case forecasts
for the next two reported periods are apportioned to give a
rolling 12 months-ahead view, and the suffix ‘pr’ is used to
indicate prospective. Otherwise reported historic results are
used, adjusted to a normalised basis in order to achieve a sound
comparison with future estimates.
The calculation
of PER is performed as follows:
Step 1:
Calculate EPS
If forecasts
are not available, this is simply the historic normalised EPS
for the last reported period, adjusted when necessary to compensate
for non-standard periods and share capital changes.
If forecasts
are available, EPS is calculated on a rolling 12 months-ahead
basis which apportions forecast EPS for the current and following
reporting periods.
To illustrate
this, the example below shows 12 months-ahead EPS measured at
28th February 1997. The current share price is 445p, the next
year-end is 30th September 1997, and EPS forecasts are available
for the current year, to September 1997, and the following year.
The PER works out at 22.8.
Step 2:
Calculate PER as follows:
LATEST SHARE
PRICE
-----------------------
= PER (X)
EPS
445p
= ---------
= 22.8
19.5p
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