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McDonald's Corp (NYSE:MCD)
E10
$4.51 (As of Sep. 2015)

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.

McDonald's Corp's adjusted earnings per share data for the three months ended in Sep. 2015 was $1.400. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is $4.51 for the trailing ten years ended in Sep. 2015.

As of today, McDonald's Corp's current stock price is $116.05. McDonald's Corp's E10 for the quarter that ended in Sep. 2015 was $4.51. McDonald's Corp's Shiller P/E Ratio of today is 25.73.

During the past 13 years, the highest Shiller P/E Ratio of McDonald's Corp was 34.92. The lowest was 20.93. And the median was 27.02.


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, McDonald's 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)
=1.4/237.945*237.945
=1.400

Current CPI (Sep. 2015) = 237.945.

McDonald's Corp Quarterly Data

201309201312201403201406201409201412201503201506201509201512
per share eps 1.5201.3981.2101.4001.0901.1290.8401.2601.4000.000
CPI 234.149233.049236.293238.343238.031234.812236.119238.638237.945236.525
Adj_EPS 1.5451.4271.2181.3981.0901.1440.8461.2561.4000.000
201103201106201109201112201203201206201209201212201303201306
per share eps 1.1501.3501.4501.3301.2301.3201.4301.3811.2601.380
CPI 223.467225.722226.889225.672229.392229.478231.407229.601232.773233.504
Adj_EPS 1.2251.4231.5211.4021.2761.3691.4701.4311.2881.406
200809200812200903200906200909200912201003201006201009201012
per share eps 1.0500.8700.8700.9801.1501.1111.0001.1301.2901.162
CPI 218.783210.228212.709215.693215.969215.949217.631217.965218.439219.179
Adj_EPS 1.1420.9850.9731.0811.2671.2241.0931.2341.4051.261
200603200606200609200612200703200706200709200712200803200806
per share eps 0.4900.6700.6801.0000.620-0.6000.8901.0630.8101.040
CPI 199.800202.900202.900201.800205.352208.352208.490210.036213.528218.815
Adj_EPS 0.5840.7860.7971.1790.718-0.6851.0161.2040.9031.131

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.

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

Shiller P/E Ratio=Share Price/E10
=116.05/4.51
=25.73

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

During the past 13 years, the highest Shiller P/E Ratio of McDonald's Corp was 34.92. The lowest was 20.93. And the median was 27.02.


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.

McDonald's Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
e10 1.661.782.002.292.583.023.534.014.300.00

McDonald's Corp Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
e10 3.884.014.124.244.274.304.324.444.510.00
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