CAPE Ratio Simple Definition, Overview, and Formula Breakdown
For example, if a company’s stock price is $100 and its earnings per share over the past 10 years have averaged $10, then its CAPE ratio would be 100/10, or 10. Generally, relying on one-year earnings doesn’t accurately predict long-term company financial performance. As a result, John Y. Campbell and Robert Shiller stated that future earnings could be expected …