I am trying to calculate the historical PE ratios of a stock, but which date should I use to get the stock price in calculating the PE ratio?
My current approach is to use the stock price of a day after the stock's financial results are released. My rationale is the market will take a day to react to the stock's financial results, and the stock price will adjust accordingly, assuming that the market is efficient.
For example, if the stock's financial earning is annouced on 1 Feb 2010, I will take the stock price on 2 Feb 2010 to calculate the PE ratio.
Does this make sense?