You use the earnings per share of the last four quarters to calculate the price-to-earnings ratio, a metric normally referred to as trailing earnings per share. The most commonly displayed P/E ratio is a trailing P/E ratio. Trailing P/E is based on the most recent four quarters of earnings. In all but one quarter of the year, the P/E ratio reflects earnings occurring in the current fiscal year and those that the company delivered in the prior fiscal year.
Some investors use a different metric, the forward P/E ratio, which comes from the company’s guidance. It’s common for company management to issue earnings forecasts for subsequent quarters. Investors and analysts can use these numbers to calculate a forward P/E ratio. It gives investors an idea of the company's confidence in the profit forecast over the next four quarters.
For investors looking to take a long position in a company’s stock, the forward P/E ratio may be more valuable than its current P/E ratio. By contrast, short-term traders may care more about current P/E ratios because they want to profit in the short term.