Quick explanation: FY earnings cover a company's reported financial year. TTM earnings (trailing twelve months) cover the most recent twelve-month period. Forward earnings estimate profits for a future period, based on forecasts rather than completed results. The same company can show three quite different P/E ratios depending on which one is used.
Financial-year earnings
For most Indian companies, the financial year runs from 1 April to 31 March. FY2026, for example, typically refers to 1 April 2025 to 31 March 2026.
FY earnings are useful because they come from a defined reporting period and, once audited, have a clear reporting basis. Annual reports, dividend decisions and many long-term comparisons are built on them.
Their weakness is age. By the time a full-year result is published and then used through the following months, it can describe a period that ended many months earlier. A business that has changed significantly since then is poorly described by its last FY figure.
Calculating TTM earnings
TTM updates the annual figure with the most recent quarters. Assume a company reports:
- FY2026 annual profit: ₹1,000 crore
- April–September 2025 profit: ₹450 crore
- April–September 2026 profit: ₹600 crore
At the end of September 2026:
= 1,000 − 450 + 600 = ₹1,150 crore
This replaces the matching six months of the previous financial year with the latest six months, so the total still covers exactly twelve months.
The four-quarter method. An equivalent approach is simply to add the latest four reported quarters: for example, October–December 2025, January–March 2026, April–June 2026 and July–September 2026. Both methods should give the same answer if the figures are consistent and on the same basis.
Most stock screeners and broker platforms show a P/E based on trailing earnings, updated as each quarter's results arrive. Check which basis a platform uses before comparing its figures with another source.
Forward earnings
Suppose analysts estimate that the company will earn ₹1,400 crore over the next twelve months.
This is a forecast, not a reported result. Forecasts can be revised, and they can prove inaccurate, sometimes by a wide margin.
Forward estimates are usually a consensus: an average of forecasts from the analysts who cover the company. Large companies are covered by many analysts; smaller ones by few or none, which makes their estimates less reliable or unavailable.
Analyst forecasts have historically tended to be somewhat optimistic on average, and they are often revised down as the year progresses. Forward P/Es can therefore make companies look cheaper than they turn out to be.
Where forward figures come from. Brokerage research reports, financial data services and some investing platforms publish consensus estimates. When you use one, note the date and the number of analysts behind it; an estimate from three months ago, or from a single analyst, deserves less weight than a recent consensus of many.
Worked example: three different P/E ratios
Assume the company's full market cap is ₹20,000 crore.
| Earnings basis | Earnings (₹ Cr) | P/E |
|---|---|---|
| FY2026 reported | 1,000 | 20× |
| TTM to September 2026 | 1,150 | 17.39× |
| Forward 12-month estimate | 1,400 | 14.29× |
TTM P/E = 20,000 ÷ 1,150 = 17.39×
Forward P/E = 20,000 ÷ 1,400 = 14.29×
All three ratios use the same market cap but different earnings periods. For a growing company, the forward P/E will usually be the lowest and the FY P/E the highest. For a company whose profits are falling, the order reverses. Seeing all three side by side tells you which direction earnings are moving and how much the valuation depends on forecasts.
Common comparison mistakes
- Comparing one company's FY P/E with another company's forward P/E.
- Using a single quarter's profit as if it were annual profit, which makes the P/E look four times too high, or annualising one unusually good quarter.
- Forgetting to remove the matching prior-year period when updating TTM.
- Treating forward estimates as audited facts.
- Ignoring exceptional items, and changes in accounting or consolidation scope, such as an acquisition included in recent quarters but not earlier ones.
- Mixing standalone figures for one period with consolidated figures for another.
Seasonality matters too. Some businesses earn much more in particular quarters, such as consumer companies around festivals. That is another reason to use full twelve-month figures rather than annualising a single quarter.
Which one should you use?
FY earnings suit long-term comparisons and audited, settled figures.
TTM earnings suit an up-to-date view of what the company has actually earned recently, and are the most common basis for screener P/Es.
Forward earnings suit understanding what the market price assumes about the future, but treat them as opinion, not fact.
Many investors look at all three, and pay attention when they differ sharply. A forward P/E far below the TTM P/E means the market expects a large profit jump; ask how realistic that is.
Key takeaways
- Always label the earnings period behind any P/E.
- TTM covers the latest four quarters or an equivalent twelve months.
- Forward P/E depends on uncertain, often optimistic forecasts.
- Comparable valuation needs comparable earnings definitions, periods and dates.
All figures on this page are hypothetical teaching examples.
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Frequently Asked Questions
What does TTM mean in the stock market?
Trailing twelve months: the company's results over the most recent twelve-month period, usually the latest four reported quarters.
How do you calculate TTM earnings?
Take the last full-year profit, subtract the profit of the earlier part-year period, and add the matching latest part-year period, or simply add the last four quarters.
What is forward P/E?
Market cap or price divided by estimated earnings for a future period, usually the next twelve months, based on analyst forecasts.
Why is forward P/E usually lower than trailing P/E?
For growing companies, expected future earnings are higher than past earnings, so the same price divided by larger earnings gives a lower multiple.
Can I annualise one quarter's profit?
It is risky. Seasonality and one-off items can make a single quarter unrepresentative, so twelve-month figures are more reliable.
Related Reading
- The P/E formula these figures feed
- Choosing the right profit basis
- How changing earnings move the multiple
- Revenue, profit and EPS defined
- Finding quarterly profit figures
- Audited full-year numbers
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