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As of today, Rio Tinto PLC's current share price is $31.30. Rio Tinto PLC's E10 for the quarter that ended in Dec. 2015 was $2.88. Rio Tinto PLC's Shiller P/E Ratio for today is 10.87.
During the past 13 years, Rio Tinto PLC's highest Shiller P/E Ratio was 42.64. The lowest was 5.86. And the median was 16.02.
E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. E10 is the average of the inflation adjusted earnings of a company over the past 10 years.
Rio Tinto PLC's adjusted earnings per share data of for the fiscal year that ended in Dec15 was $-0.475. Add all the adjusted EPS for the past 10 years together and divide 10 will get our E10, which is $2.88 for the trailing ten years ended in Dec15.
For the Shiller P/E, the earnings of the past 10 years are inflation-adjusted and averaged. The result is used for P/E calculation. Since it looks at the average over the last 10 years, the Shiller P/E is also called PE10.
The Shiller P/E was first used by professor Robert Shiller to measure the valuation of the overall market. The same calculation is applied here to individual companies.
Rio Tinto PLC's Shiller P/E Ratio for today is calculated as
|Shiller P/E Ratio||=||Share Price||/||E10|
Rio Tinto PLC's E10 for the quarter that ended in Dec. 2015 is calculated as:
For example, Rio Tinto PLC's adjusted earnings per share data for the fiscal year that ended in Dec15 was:
|Adj_EPS||=||Earnigns per Share||/||CPI of Dec15 (Change)||*||Current CPI (Dec15)|
Current CPI (Dec15) = 236.525.
Rio Tinto PLC Annual Data
|per share eps||5.556||5.663||2.851||2.753||7.262||3.010||-1.6||1.973||3.512||-0.5|
Add all the adjusted EPS together and divide 10 will get our E10.
Compared with the regular P/E ratio, which works poorly for cyclical businesses, the Shiller P/E smoothed out the fluctuations of profit margins during business cycles. Therefore it is more accurate in reflecting the valuation of the company.
If a company has consistent business performance, the Shiller P/E should give similar results to regular P/E.
Compared with the P/S ratio, the Shiller P/E makes the comparison between different industries more meaningful.
The Shiller P/E assumes that over the long term, businesses and profitability revert to their means. If a companys business model does not work in the future compared with the past, the Shiller P/E and P/S ratio will give false valuations.
Rio Tinto PLC Annual Data
Rio Tinto PLC Semi-Annual Data