Switch to:
GuruFocus has detected 5 Warning Signs with Diageo PLC \$DEO.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Diageo PLC (NYSE:DEO)
E10
\$4.38 (As of Jun. 2016)

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.

Diageo PLC's adjusted earnings per share data for the fiscal year that ended in Jun. 2016 was \$5.063. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is \$4.38 for the trailing ten years ended in Jun. 2016.

As of today, Diageo PLC's current stock price is \$117.47. Diageo PLC's E10 for the fiscal year that ended in Jun. 2016 was \$4.38. Diageo PLC's Shiller P/E Ratio of today is 26.82.

During the past 13 years, the highest Shiller P/E Ratio of Diageo PLC was 34.58. The lowest was 15.60. And the median was 23.79.

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, Diageo PLC's adjusted earnings per share data for the fiscal year that ended in Jun. 2016 was:

 Adj_EPS = Earnigns per Share / CPI of Jun. 2016 (Change) * Current CPI (Jun. 2016) = 5.0625 / 241.018 * 241.018 = 5.063

Current CPI (Jun. 2016) = 241.018.

Diageo PLC Annual Data

 200706 200806 200906 201006 201106 201206 201306 201406 201506 201606 per share eps 4.37 4.629 4.216 3.864 4.927 4.715 6.04 6.044 5.894 5.063 CPI 208.352 218.815 215.693 217.965 225.722 229.478 233.504 238.343 238.638 241.018 Adj_EPS 5.055 5.098 4.711 4.273 5.261 4.953 6.235 6.112 5.953 5.063

Add all the adjusted EPS together and divide 10 will get our e10.

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.

Diageo PLC's Shiller P/E Ratio of today is calculated as

 Shiller P/E Ratio = Share Price / E10 = 117.47 / 4.38 = 26.82

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

During the past 13 years, the highest Shiller P/E Ratio of Diageo PLC was 34.58. The lowest was 15.60. And the median was 23.79.

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 local exchange's currency.

Diageo PLC Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 e10 0.00 3.76 3.22 3.14 3.73 3.77 4.28 5.12 4.98 4.38

Diageo PLC Semi-Annual Data

 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 e10 3.77 0.00 4.28 0.00 5.12 0.00 4.98 0.00 4.38 0.00
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to \$400 per referral. ( Learn More)