What I've been trying to get my head round of late, is one of trailing and forward figures, primarily regarding PE, although presumably they could apply to other figures too (e.g. EPS). In addition to figuring out their calculation, I'm also curious of the relative perceived merits of either measure.

I'm now going assume that when people (i.e. publishers of financial data and analysis) refer to "trailing PE", they actually mean "TTM PE", typically, where TTM means trailing twelve months, or to simple folk, the "last year mate".

I'm now going to look at an example, Marshalls Plc (MSLH) a construction material manufacturer and figure out their TTM PE, feel free to comment, criticise etc.

So the price bit is easy: I just lobbed in "marshalls share price" in Google search, and hey presto, I'm given a price of 440 GBp. Ok, so P/E is price divided by earnings per share right? And for arguments sake we'll say earnings means profit after tax to equity shareholders (not non-controlling interests), and that the number of shares is "the number of shares accounting for dilutive effects". I believe that the dilutive effects bit is in order to add to the number of regularly traded shares, those shares which are also on the market, particularly due to a lot of companies these days giving their employees share options, i.e. free (or very low priced shares) with the option to hold or sell etc.

So for the number of shares, I decide to use the figure "last printed", well the last number I could find. That being the "full annual report" published in December of 2017 i.e.

https://www.marshalls.co.uk/documents/r ... report.pdf

I just search for the word "diluted" and ta da on page 92, "Weighted average number of Ordinary Shares (diluted) 2017 198,902,816". Actually I've just found that browsing MSLHs investor pages, has bought us a more up-to-date share count of about 199.4M.

But how do we deduce the "earnings value"? The report I linked above on page 72 (and page 92) informs us that the earnings figure we desire is 42.5M GBP.

But since this figure was valid in the "year ended 31 December 2017" (see the top of page 72), then how we do account for the last 9 months? Since presumably this is what we require to account for a "true" TTM?

So looking further at: https://www.marshalls.co.uk/investor/investor-centre A ha! To the right of the screen I see that on August 2018 an interim announcement was made and reading the PDF, we see that we half year results (12/17-06/18).

I see a figure of 32.5M GBP profit before tax for 6 months. Lets x2 to derive a 65M GBP annual hypothetical value, i.e. assume no change in growth rate etc. And noting on page 27 of the 2017 report "The effective tax rate was 19.1 per cent", I'll calculate that this 65M for a year would be

65 * 0.81 = 52.65 after taxand looking again at the 2017 it looks as if the non-controlling interests have about 1% stake in the earnings, so I'll leave the 52.65 as is.

So how to make a reported 42.5M for the year ended 2017, and a hypothetical 52.65M for year ended 2018 into the TTM which would be needed for a TTM PE calculation? Where I'll assume 3 months comes from the 42.5M reported up to 2017, and 9 months from this part reported/part guessed year of 52.65M.

So

(42.5M * 3/12) + (52.65M * 9/12) = 50.13M

Is this the kind of process that stock analysts would use? I can't see many other ways, other than guess work, or extrapolating one or more prior reports' data?

So finally my estimate for MSLH's TTM PE is:

4.40 / (50.13 / 199.4) = 17.05

Make sense?

Matt (and Mel)

PS yes, we do hold MSLH shares