Is this market getting overheated? One of the most commonly used price-to-earnings ratios based on future earnings has reached its highest level since 2004, according to FactSet data.
The S&P 500 index's 12-month forward price-to-earnings ratio has climbed to 17.6, based on Friday’s closing price of 2,351 and a 2017 earnings-per-share estimate of $133.49. The current forward 12-month P/E ratio is now above the 20-year average of 17.2, according to FactSet.
The last time the forward P/E was this high was on June 23, 2004, when the S&P 500 closed at 1,144.06 and analysts expected $65.14 earnings per shares over the following 12 months. Forward P/Es peaked above 27 in 2000, just around the time the dot.com bubble burst.
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