The Graham and Dodd price earnings ratio simply uses the average earnings over the last ten years as E in the P/E ratio. Although the time cost of money over the ten years seems to be ignored, there is supposedly a correlation between companies with a Graham and Dodd PE of between 5 and 10 (the lower the better or cheaper the stock is) and future stock yield over the next decade. PEs of between 10 to 15 should not be ignored as they also yield up to 8% on average. Stocks with a PE above 15 are considered popular and/or just expensive or are expecting fantastic growth in the near future.
The main purpose of using the average earnings over 10 years is to smooth out earnings volatility and give a better indication of potential earnings compared to 1 year of earnings which may represent a very good or a very bad year for the company.