the S&P, P/E, P/forwardE, P/B, P/S, etc.
Well gentleman and ladies (I, counter convention, put gentlemen ahead of ladies as I have surmised from my time on CAPs that the gents outnumber the ladies)
I have sat down this evening and added up the P/E, forward P/E, price/sales, and price/book of the S&P 500.
I used Zacks Research Wizard and, to fill in the blanks where Zacks didn't have data, Yahoo finance.
The stats are these:
Price/sales on the S&P = 0.96
Price/book on the S&P = 1.9
Price/earnings, forward, on the S&P = 12.6
Price/earnings, current fiscal year = 14.5
Historically the average p/e on the S&P over the last 50 years is 16.8, calcualted fromhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm
It could be concluded that the S&P is below its historical average p/e. Draw what conclusions you will from this excercise. AIG is incorrectly reported by ZACKs, reporting earnings next year nad this year. Entering approximately AIGs losses from the last 12 months raises the current p/e to 17. a 2.5 point increase...
this highlights that what I've repeatedly said is approximately correct. Eliminate the wild one-time losses form AIG, the car makers, and you have a situation where stocks are cheap relative to historical averages, even after the "rally" (which shouldn't be called a rally, but rather called a bounce back to the basic trough we've been in since october).
A price/sales of <1 seems reasonable, certainly not exorbitantly expensive. A price/book of less than 2 seems also reasonable, certainly not exorbitant. And a p/e of 12-15 seems reasonable.
The conclusion is that stocks may well be reasonably priced now, neither expensive nor particularily cheap, but below historical averages. If we filter out 1998-2000, to eliminate the tech bubble, the historical average p/e is 15.X, still above where we are today if we filter out AIG and well above where analysts expect us to be in the next 12 months.
The point of this excercise was to assess whether we were overpriced historically or underpriced. The conclusion is that we are slightly below historical pricings, and that if the S&P regressed to historical pricings we would be at roughly 1100.
I hope thats useful to someone.