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CareFusion Corp (NYSE:CFN)
E10
\$1.61 (As of Dec. 2014)

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.

CareFusion Corp's adjusted earnings per share data for the three months ended in Dec. 2014 was \$0.830. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is \$1.61 for the trailing ten years ended in Dec. 2014.

As of today, CareFusion Corp's current stock price is \$59.91. CareFusion Corp's E10 for the quarter that ended in Dec. 2014 was \$1.61. CareFusion Corp's Shiller P/E Ratio of today is 37.21.

Definition

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 todays 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. Lets 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 2001s 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, CareFusion Corp's adjusted earnings per share data for the three months ended in Dec. 2014 was:

 Adj_EPS = Earnigns per Share / CPI of Dec. 2014 (Change) * Current CPI (Dec. 2014) = 0.83 / 234.812 * 234.812 = 0.830

Current CPI (Dec. 2014) = 234.812.

CareFusion Corp does not have a history long enough to calculate E10. Therefore GuruFocus does not calculate it.

Explanation

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.

CareFusion Corp's Shiller P/E Ratio of today is calculated as

 Shiller P/E Ratio = Share Price / E10 = 59.91 / 1.61 = 37.21

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Be Aware

Shiller P/E Ratio works better for cyclical companies. It gives you a better idea on the company's real earnings power.

Related Terms

Shiller P/E Ratio

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

CareFusion Corp Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 e10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.69

CareFusion Corp Quarterly Data

 Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 e10 0.00 0.00 0.00 0.00 0.00 1.60 1.63 1.69 1.66 1.61
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