If you are plugging numbers into an equation or a form to try and make projections about the future, it is important to understand what they are and what they mean. Otherwise, how can you really understand what you are projecting? This is especially true for ratios such as P/E ratio.

Here is a fascinating analysis of the variation of reported Trailing 12 Month P/E ratios that was found across several widely used websites:

The Not So Standard Trailing 12 Month P/E Ratio

Note that non of the values reported is necessarily "wrong". They will all just communicate different information.

The more you learn to speak the language of business, the better of an investor you will be. This article is a great opportunity for you and your investment club to learn a little more about that.

Laurie Frederiksen
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