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Zale Corp (NYSE:ZLC)
E10
$-2.43 (As of Jan. 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.

Zale Corp's adjusted earnings per share data for the three months ended in Jan. 2014 was $1.138. 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 $-2.43 for the trailing six years ended in Jan. 2014.

As of today, Zale Corp's current stock price is $21.13. Zale Corp's E10 for the trailing six years ended in Jan. 2014 was $-2.43. Zale Corp's Shiller P/E Ratio of today is .


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, Zale Corp's adjusted earnings per share data for the three months ended in Jan. 2014 was:

Adj_EPS=Earnigns per Share/CPI of Jan. 2014*CPI of Current
=1.13/233.916*235.51
=1.138

Since most companies do not have as long as 10 years history, GuruFocus uses 6 years to do the calculation.

Current CPI = 235.51.

Zale Corp Quarterly Data

201110201201201204201207201210201301201304201307201310201401
per share eps -0.9900.770-0.140-0.613-0.8801.0200.130-0.246-0.8301.130
CPI 226.421226.665230.085229.104231.317230.280232.531233.596233.546233.916
Adj_EPS -1.0300.800-0.143-0.630-0.8961.0430.132-0.248-0.8371.138
200904200907200910201001201004201007201010201101201104201107
per share eps -0.610-2.810-1.8700.210-0.380-0.888-3.0500.730-0.280-1.015
CPI 213.240215.351216.177216.687218.009218.011218.711220.223224.906225.922
Adj_EPS -0.674-3.073-2.0370.228-0.411-0.959-3.2840.781-0.293-1.058
200804200807200810200901
per share eps -0.400-0.146-1.430-1.000
CPI 214.823219.964216.573211.143
Adj_EPS -0.439-0.156-1.555-1.115

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.

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

Shiller P/E Ratio=Share Price/E10
=21.13/-2.43
=

* 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.

Zale Corp Annual Data

Jul04Jul05Jul06Jul07Jul08Jul09Jul10Jul11Jul12Jul13
e10 1.311.491.431.441.130.24-0.64-1.69-2.08-2.34

Zale Corp Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
e10 -1.76-1.97-2.08-2.08-2.14-2.31-2.30-2.34-2.37-2.43
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