Thursday, March 5, 2009

Pick Your Price-Earnings

Here is the most recent Standard & Poor's Earnings & Estimates Report. Trailing twelve-month reported earnings are at about $55 per share, forward estimates vary from $35 (top-down) to $65 (bottom-up). Historic market earnings multipliers typically range between 10 and 20+, clustering towards the upper end. As of today's close, we are currently just over 12 on a trailing basis. The wide-range of resultant market values such a multiplier matrix suggests is emblematic of the uncertainty we are facing.

2 comments:

Anonymous said...

I liked an analysis featured a few months ago at Hussman Funds site: the P/S ratio for the S&P varied from .5 to 1.0 in trough to peak markets until the '80s, and then was regularly overshooting, something like 1.0 to 1.4 trough to peak during the 20 years since. If we use the P/S, and say that we are going back to historical bounds, and given a P/S of 1.0 is at roughly 900, then we could be looking at 450. BTW, "typical" bears were at .75, which would have been hit at the 775 level...

- Carl

Jeff Pietsch CFA Esq said...

Excellent Carl, thanks for your contribution.