Price-to-Earnings (P/E)

Trailing P/E = Market price per share / EPS over previous 12 months
Leading P/E = Market price per share / forecasted EPS over next 12 months

Advantages:
· Earning is a key determinant of value
· Easy to use
· Most commonly measure
· Studies have indicated a strong correlation to long-term average returns

Disadvantages:
· Not useful with negative earnings
· Earnings can be volatile
· Earnings are more easily manipulated