The price earnings ratio is the ratio of the market price per share to the earnings per share i.e.

PE =  Market Price per share
            Earning per share

The earnings per share (EPS) is basically considered on the basis of net profit for the last four quarters. This is popularly known as the trailing P/E. When the EPS is based on the expected earnings for the next few quarters, then what one gets is known as the forward P/E. There is also a third variation that takes the in-between path, where the EPS for the last two quarters and forward earnings for the next two quarters are taken into account.

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