Yesterday, we described the slow downhill trend that stocks have been on for the past month and a half or so. We've also been talking lately about the surge in corporate profits. You add those two things together, and what do you get? Stock valuations have now fallen to their cheapest level in 26 years.
The average stock price of the S&P 500 sits now at 14.5 times the past year's earnings. The historical average for that number, dating back to 1991, is 20.1. The price-to-earnings ratio is now lower than its been for 96 percent of all trading days in the past 20 years.
And earnings may not be done rising. According to a survey of 9,000 economist done by Bloomberg News, the companies on the S&P 500 are expected to increase their earnings by an average of 18 percent this year over 2010.
No comments:
Post a Comment