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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.
Broadcom Corp's adjusted earnings per share data for the three months ended in Sep. 2015 was $0.690. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is $1.08 for the trailing ten years ended in Sep. 2015.
As of today, Broadcom Corp's current stock price is $54.67. Broadcom Corp's E10 for the quarter that ended in Sep. 2015 was $1.08. Broadcom Corp's Shiller P/E Ratio of today is 50.62.
E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. When we calculate the today's Shiller P/E ratio of a stock, we use todays price divided by E10.
What is E10? How do we calculate E10?
E10 is the average of the inflation adjusted earnings of a company over the past 10 years. Lets use an example to explain.
If we want to calculate the E10 of Wal-Mart (WMT) for Dec. 31, 2010, we need to have the inflation data and the earnings from 2001 through 2010.
We adjusted the earnings of 2001 earnings data with the total inflation from 2001 through 2010 to the equivalent earnings in 2010. If the total inflation from 2001 to 2010 is 40%, and Wal-Mart earned $1 a share in 2001, then the 2001s equivalent earnings in 2010 is $1.4 a share. If Wal-Mart earns $1 again in 2002, and the total inflation from 2002 through 2010 is 35%, then the equivalent 2002 earnings in 2010 is $1.35. So on and so forth, you get the equivalent earnings of past 10 years. Then you add them together and divided the sum by 10 to get E10.
For example, Broadcom Corp's adjusted earnings per share data for the three months ended in Sep. 2015 was:
|Adj_EPS||=||Earnigns per Share||/||CPI of Sep. 2015 (Change)||*||Current CPI (Sep. 2015)|
Current CPI (Sep. 2015) = 237.945.
Broadcom Corp Quarterly Data
|per share eps||-0.430||0.550||0.290||0.280||-0.002||0.160||0.640||0.340||0.630||0.690|
|per share eps||0.470||0.400||0.310||0.480||0.460||0.150||0.280||0.380||0.430||0.330|
|per share eps||0.250||0.310||-0.290||-0.190||0.030||0.160||0.120||0.400||0.520||0.600|
|per share eps||0.330||0.200||0.180||0.190||0.070||0.100||0.060||0.050||0.160||0.140|
Add all the adjusted EPS together and divide 10 will get our e10.
If a company grows much fast than inflation, E10 may underestimate the company's earnings power. Shiller P/E Ratio can seem to be too high even the actual P/E is low.
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.
Broadcom Corp's Shiller P/E Ratio of today is calculated as
|Shiller P/E Ratio||=||Share Price||/||E10|
Shiller P/E Ratio works better for cyclical companies. It gives you a better idea on the company's real earnings power.
Broadcom Corp Annual Data
Broadcom Corp Quarterly Data