Operating PE Ratio
The Operating PE Ratio is the price an investor pays for one dollar of pre-tax operating earnings.
It is similar to a standard PE Ratio, but some investors consider it a better indicator of future earning power than earnings yield since the earnings number excludes tax effects, non-operating income and expenses, discontinued operations, extraordinary items, preferred stock dividends and accounting change differences.
Formula
Operating PE Ratio = Market Capitalization / TTM Operating Earnings
Operating PE Ratio will not calculate if TTM Operating Earnings are negative
TTM Operating Earnings excludes:
- Earnings from discontinued operations
- Extraordinary items
- Preferred stock dividends
- Accounting changes
- Other non-operating earnings and expenses