A price-to-earnings (P/E) ratio divides a share price by earnings per share (EPS, profit divided by shares). Oracle's close on 29 May 2026, the last trading day of its fiscal 2026, gives a worked example. Divided by the EPS Oracle reported for fiscal 2026, the price gives a trailing P/E of 38.7. Divided by the EPS Oracle guided to for fiscal 2027, the same price gives a forward P/E of 28.0.
The first EPS follows Generally Accepted Accounting Principles (GAAP, the US accounting rules). The second is non-GAAP EPS, which the company adjusts to leave out some costs that GAAP includes. The two ratios therefore differ partly because earnings are defined in two ways and partly because the company expects earnings to grow. This explainer shows where each figure comes from, how much each effect matters and why the forward ratio rests on an estimate.
What is the difference between forward P/E and trailing P/E? The price-to-earnings (P/E) ratio divides a share price by earnings per share (EPS). Trailing P/E uses profit the company has already reported, usually for the past twelve months. Forward P/E uses profit expected for the next twelve months or the next fiscal year.
Trailing earnings come from filed accounts. Forward earnings come from a consensus estimate (the mean or median of published profit forecasts) or from company guidance (the company's own forecast), so they can turn out wrong.
Earnings can be defined in more than one way. Oracle's fiscal 2026 EPS was $5.83 under US accounting rules (GAAP) and $7.63 after the company left out some costs (non-GAAP).
For companies whose profit swings, one year's earnings are a poor guide to the next, so the two ratios can differ widely.
Trailing P/E: the price over reported earnings
Trailing P/E divides the share price by the EPS reported for the past twelve months. The EPS comes from the company's filings. Right after a year-end report it is the annual figure. Between reports it is the sum of the latest four quarters.
Oracle's fiscal 2026 ended on 31 May 2026. Its annual report shows diluted EPS of $5.83 on a GAAP basis. Diluted EPS counts the extra shares that options and share awards could create.
The close on 29 May 2026 was $225.78. Dividing $225.78 by $5.83 gives 38.7. Oracle published these results on 10 June 2026, after that price date. The example pairs the fiscal year-end price with the year's figures to show the arithmetic.
The price-to-earnings ratio explainer covers the ratio in full.
Forward P/E: the price over expected earnings
Forward P/E divides the share price by EPS that has not been reported yet. The horizon is the next twelve months or the next fiscal year.
The two horizons cover different periods. Oracle's fiscal 2027 runs from 1 June 2026 to 31 May 2027, so at the 29 May 2026 close it lay entirely ahead. A next-twelve-months figure rolls forward each day, while a fiscal-year figure stays fixed until the year ends.
Two sources supply the number. The first is a consensus estimate, which is the mean or median of the published profit forecasts for a company.
The second source is company guidance, which is the figure or range that the company gives itself. Oracle's own guidance came in its results release of 10 June 2026. The company said it expected non-GAAP EPS of $8.05 for fiscal 2027. Dividing $225.78 by $8.05 gives 28.0.
Oracle's EPS has more than one version, so one share price gives four P/E ratios. Oracle's non-GAAP EPS removes stock-based compensation, amortisation of acquired intangible assets, restructuring costs and the related tax effects. The $7.63 also includes one-time investment gains. Without those gains it was $6.83.
Source: Oracle Form 10-K, fiscal 2026, and results release of 10 June 2026; YX Insights
Chart 1 shows the four ratios at the 29 May 2026 close. They are 38.7 on GAAP EPS, 33.1 on non-GAAP EPS without the gains and 29.6 on non-GAAP EPS as reported. The forward ratio on the fiscal 2027 guidance is 28.0.
Switching from GAAP EPS of $5.83 to non-GAAP EPS without the gains of $6.83 lifts EPS by 17.2%. The step from $6.83 to the fiscal 2027 guidance of $8.05 lifts it by a further 17.9%.
A GAAP trailing P/E set beside a non-GAAP forward P/E mixes both effects. Comparing the first bar with the last bar does not isolate expected growth.
Why forward figures rest on estimates
Reported EPS comes from filed accounts. Forward EPS is a forecast. Forecasts can miss. ExxonMobil is a cyclical business, which means its profit rises and falls in swings. It shows how far one year's profit can move.
Source: ExxonMobil Form 10-K filings, 2009 to 2025; YX Insights
Chart 2 shows ExxonMobil's GAAP diluted EPS. It was $1.88 in 2016, negative $5.25 in 2020 and $13.26 in 2022. Any forecast made a year ahead had to span swings of that size.
The next chart divides each year-end share price by that year's EPS, which is the trailing P/E. It also divides the same price by the next year's actual EPS. That is the forward P/E that a perfect forecast would have produced. Real forecasts add their own errors to these gaps.
Source: ExxonMobil Form 10-K filings; YX Insights
At the last trading day of 2015 the trailing P/E was 20.2 and the perfect-forecast forward P/E was 41.5. At the last trading day of 2016 they were 48.0 and 19.5.
At the end of 2021 the two were 11.4 and 4.6. Years with negative EPS leave a gap in the chart, because a P/E has no meaning there.
How an estimate error moves forward P/E
The forward figure moves with any error in the estimate. Suppose Oracle's fiscal 2027 EPS came in 10% below the $8.05 guidance. The forward P/E at $225.78 would then be 31.2.
If it came in 10% above, the ratio would be 25.5. These two figures are hypotheticals that show the arithmetic.
Which one tells you more?
Neither tells the whole story. They answer different questions.
Trailing P/E compares the price with profit already reported in filings. It looks backwards. Forward P/E compares the price with profit expected. It looks ahead, but it depends on an estimate and on how earnings are defined.
A fair comparison needs four things:
The same earnings basis on both sides, GAAP or non-GAAP.
The same horizon, the next fiscal year or the next twelve months.
A note on whether one-time gains or losses sit inside the figure.
A note on who produced the forecast: a consensus estimate or the company.
ExxonMobil's profit swings widely, so its two ratios sit far apart. Oracle's differ because of how earnings are defined as well as when they are earned.
Common questions about forward and trailing P/E
How do you calculate forward P/E?
Divide the share price by expected EPS for the next twelve months or the next fiscal year. For Oracle, the $225.78 close on 29 May 2026 divided by its non-GAAP EPS guidance of $8.05 for fiscal 2027 gives 28.0.
Is forward P/E higher or lower than trailing P/E?
It can be either. Forward P/E is lower when expected EPS is higher than reported EPS. At the 29 May 2026 close, Oracle's forward P/E of 28.0 was below its trailing GAAP P/E of 38.7. Part of that gap comes from comparing non-GAAP guidance of $8.05 with GAAP EPS of $5.83.
Where does forward EPS come from?
Forward EPS comes from a consensus estimate or from company guidance. A consensus estimate is the mean or median of the published profit forecasts for a company. Guidance is the company's own expected figure, such as Oracle's $8.05 for fiscal 2027. Both are forecasts, so the actual result can differ.
Why do trailing and forward P/E differ?
They use different earnings. Forward P/E looks one year ahead, so it reflects expected growth or decline. The two can also use different definitions, such as GAAP for trailing and non-GAAP for forward. At the end of 2016, ExxonMobil's trailing P/E was 48.0 against 19.5 using the next year's actual EPS.
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