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Medtronic Inc (NYSE:MDT)
E10
$3.14 (As of Oct. 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.

Medtronic Inc's adjusted earnings per share data for the three months ended in Oct. 2014 was $0.831. Since most companies do not have as long as 10 years history, here we use 6 years to calculate. Add all the adjusted EPS for the past 6 years together and divide 6 will get our e10, which is $3.14 for the trailing six years ended in Oct. 2014.

As of today, Medtronic Inc's current stock price is $74.08. Medtronic Inc's E10 for the trailing six years ended in Oct. 2014 was $3.14. Medtronic Inc's Shiller P/E Ratio of today is 23.60.

During the past 13 years, the highest Shiller P/E Ratio of Medtronic Inc was 51.66. The lowest was 12.10. And the median was 20.24.


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, Medtronic Inc's adjusted earnings per share data for the three months ended in Oct. 2014 was:

Adj_EPS=Earnigns per Share/CPI of Oct. 2014*CPI of Current
=0.83/238.21*238.389
=0.831

Since most companies do not have as long as 10 years history, here we use 6 years to calculate:

Current CPI = 238.389.

Medtronic Inc Quarterly Data

201207201210201301201304201307201310201401201404201407201410
per share eps 0.8300.6300.9700.9460.9300.8900.7500.4430.8700.830
CPI 229.104231.317230.280232.531233.596233.546233.916237.072238.250238.210
Adj_EPS 0.8640.6491.0040.9700.9490.9080.7640.4450.8710.831
201001201004201007201010201101201104201107201110201201201204
per share eps 0.7500.8640.7600.5200.8600.7210.7700.8200.8800.946
CPI 216.687218.009218.011218.711220.223224.906225.922226.421226.665230.085
Adj_EPS 0.8250.9450.8310.5670.9310.7640.8120.8630.9260.980
200901200904200907200910
per share eps 0.6500.1140.4000.780
CPI 211.143213.240215.351216.177
Adj_EPS 0.7340.1270.4430.860

Add all the adjusted EPS together and divide 6 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.

Medtronic Inc's Shiller P/E Ratio of today is calculated as

Shiller P/E Ratio=Share Price/E10
=74.08/3.14
=23.59

* 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 Medtronic Inc was 51.66. The lowest was 12.10. And the median was 20.24.


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.

Medtronic Inc Annual Data

Apr05Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14
e10 1.241.471.741.982.022.232.492.712.853.04

Medtronic Inc Quarterly Data

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
e10 2.752.772.792.852.922.963.073.043.103.14
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