Valuation Ticks Higher

The most recent new high for the S&P 500 has been accompanied by a big tick higher in the trailing 12-month P/E ratio.  We'll definitely need to see some earnings growth in 2010 for this rally to continue.

Don't miss the 2010 Bespoke Roundtable. 

Comments

[Don Draper]

24% earning growth rate going forward - good luck! I bet it will revert to the mean.

[Kevin Antaya]

Trailing PE is the most useless statistic around. Market is trading at a 18 multiple, using $62 forward earnings.

[Denis Ouellet]

PE ratios using trailing eps are generally better to use because no forecast is involved. However, Q408 eps were a highly unusual -$0.09. Since then, corporate America has restored its quarterly eps to the $15 range. It is therefore inappropriate to use trailing eps of $45 when the current rate is $60 and rising.If you annualize the last 9 months eps ($53) or the last quarter eps ($63), you gate closer to the true pe of the S&P 500 Index (18 or 21).For a more detailed analysis, see http://www.news-to-use.com/2009/12/us-equities-valuation-analysis-duck-you.html