Investment Advisor Compass | Static Price-to-Earnings Ratio, Dynamic Price-to-Earnings Ratio, and Rolling Price-to-Earnings Ratio

(Source: Shanghai Stock Exchange ETF Home)

2026

To better serve residents’ wealth management needs, the Shanghai Stock Exchange has launched the “Investment Advisory Compass” column, gathering professional insights from well-known institutions and continuously sharing industry fund advisory practices. Here, we will explain the meaning of advisory services in a simple and easy-to-understand way, break down asset allocation logic, discuss the significance of investment companionship, and explore professional and inclusive wealth management paths with you. On the investment journey, let the Advisory Compass guide you.

Source: Huatai Securities Submission

PART 1

Talking about different types of Price-to-Earnings (P/E) ratios

The P/E ratio refers to the ratio of a listed company’s stock price to its earnings per share, calculated as:

P/E = P (market price per share) / E (earnings per share)

From the perspective of the P/E ratio itself, it is generally understood that, for long-term investment in a company, the number of years needed to recover the initial investment through dividends alone is reflected by the P/E ratio.

Regarding the calculation methods of P/E ratios, the market price per share updates daily, but the earnings per share data is based on the company’s net profit, which is not disclosed as frequently. This leads to three types of P/E calculations: static P/E, dynamic P/E, and rolling P/E.

The static P/E uses the net profit data from the most recent annual report;

The dynamic P/E uses forecasted net profit for the current year;

The rolling P/E, also known as the TTM (Trailing Twelve Months) P/E, is based on the total net profit of the most recent four quarters.

PART 2

How to interpret the three types of P/E ratios?

The main difference among static P/E, dynamic P/E, and rolling P/E lies in how net profit is calculated:

Static P/E uses historical data, mainly reflecting the company’s “past”; rolling P/E better highlights the company’s profitability over the past year, reflecting the “present”; while dynamic P/E estimates the company’s net profit for the current year, attempting to show the “future.”

Compared to dynamic P/E, static P/E is somewhat “lagging.” If it is year-end and the annual report has not yet been released, or if the previous year’s report is old, the data’s timeliness is compromised. However, its advantage is that the net profit data is entirely based on the company’s annual report rather than estimates, making it relatively more accurate. Additionally, during the annual report season, when new reports are released, static P/E becomes more valuable as a reference.

Although dynamic P/E sounds more “forward-looking,” it relies on forecasted profits based on published financial statements. Since these are predictions, there is inherent uncertainty. If the forecast deviates, the valuation’s accuracy is affected.

Rolling P/E, based on the earnings data from the past four quarters, continuously tracks the company’s net profit. As it updates regularly, it can more timely and objectively reflect the company’s current valuation level.

Author:

Li Xiaowen S0570622090031

Wu Chunyi S0570619110030

Contact: Liu Guochi

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Investment involves risks; please proceed with caution. The information and data in this material are for reference only. Some sources are from public or third-party channels, and their accuracy, completeness, or reliability is not guaranteed. The opinions or viewpoints expressed aim to be objective and fair but are subject to timeliness and limitations. They are for auxiliary reference only and do not constitute investment advice or basis for investment decisions, nor do they equate to actual operations of the “Worry-Free Investment Portfolio.” Investors should make independent and cautious investment decisions based on their own circumstances and bear the investment risks themselves. Our company holds the “Securities Investment Consulting” qualification approved by the China Securities Regulatory Commission, with license number: 91320000704041011J.

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