Here's how to find a 'forward' P-E ratio

— -- Q: How can I find the Standard & Poor's 500's "forward P-E"?

A: While investors like to talk about a stock's or market's price-to-earnings ratio, or P-E, the term is somewhat of a generality.

As you indicate from your question, there are several ways to calculate a stock's or market's P-E. For instance, if you divide a stock's price by the company's earnings over the past twelve months, that's called the trailing P-E. And if you divide a stock's price by what the company is expected to earn this year, that's the forward P-E.

You can calculate the trailing and forward P-E for the market, as measured by the Standard & Poor's 500, too. And it's the forward P-E you're asking about, so I'll show you how to measure it.

First, you need to find out how much analysts expect companies in the S&P 500 to earn in the current year. S&P provides these data. Start on this page.

Scroll down a bit until you see a link that says "click here." Click on that link. A Microsoft Excel spreadsheet should pop up on your screen, assuming your have the spreadsheet software on your PC, containing loads of earnings data. To calculate the forward P-E, you're interested in the operating earnings per share column, which is column C.

Next, add up all the earnings estimates for the current year. To save you time, here is a table:

Q1: $12.29Q2: $14.46Q3: $16.34Q4: $17.17Total: $60.26

Now that you have the forecasted earnings for 2009, it's time to calculate the forward P-E. Just divide the S&P 500's current level by $60.26 and you'll get the forward P-E. So if the S&P 500 is 834.95, when you divide by $60.26 you arrive at a P-E of 13.9.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.