PER compares market price with earnings. A lower PER can indicate undervaluation, but it can also mean that investors do not trust future earnings. That is why WIP Labs reads current PER, historical average PER, and forward PER together rather than using one number in isolation.
Current PER and historical average
Current PER shows how the market is priced against recent earnings. The historical average shows what multiple the market has typically received across different cycles. A current PER above the average may indicate valuation pressure, but higher growth or a changed index mix can justify a higher multiple.
Why forward PER matters
Forward PER uses expected earnings. If forward PER is meaningfully below current PER and the historical average, the market may look inexpensive on future earnings. The key question is whether those earnings estimates are credible and durable.
How WIP Labs uses it
- Compare current PER with the historical average.
- Check whether forward PER is below both reference points.
- Ask whether the low forward PER reflects opportunity or skepticism about future profits.
This note is educational and is not investment advice.