The Magic Of Forward P/E Multiples In One Chart Submitted by Tyler Durden on 11/29/2013 11:45 -0500 GAAP Recession in Share 3 As readers may or may not recall, one of the main arguments the bulls had in early 2008, a month after the recession had already begun (according to the NBER's retrospective conclusion over a year later) to justify that the SP 500, which had recently hit all time highs of 1546, was not in a bubble is that the projected EPS for the following year, 2009, were 120, which meant the multiple was an oh so very cheap 12x . The same analysis with the even nearer, 2008, SP EPS which at that point were expected to print just below 100, suggested the SP at around 1500 was a "healthy" 15x multiple. Unfortunately as the events of 2008 showed, not only did the financial system nearly implode, but earnings, both actual and projected, cratered. The result is that the 2009 EPS which was initially forecast to be $120 ultimately ended up being half of that, or $60 (see chart below), which also meant that the forward multiple of a "very cheap" 12x or so ended up being, drumroll, just a tad bubbly 24x ! Which is why we urge anyone using the naive argument that stocks now are cheap based on forward multiples to observe the following chart, which shows that SP 500 2013 EPS, projected to be just below 110, are now just above what the SP was supposed to earn in early 2008 and well below the then projected 2009 EPS. Where it gets more amusing is that the current estimate for 2014 EPS is precisely where 2009 EPS were supposed to land.... before those particular earnings ended up being crushed in half. Finally as we will show in a subsequent post, 2013 EPS on a GAAP basis are currently precisely $100 with another $10.25 coming from adjustments and other write-offs. Which means that on a recurring Net Income basis, assuming Q4 earnings are roughly in line with expectations, the SP 500 is currently trading at over 18x GAAP earnings, or as the same people who in 2008 said "the market is not in a bubble" would call it, " cheap. " Average: 5 Your rating: None Average: 5 ( 4 votes) !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- - advertisements - Login or register to post comments 7006 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Explaining The Market's Brand New 15x Forward Multiple Faith, Hope, And P/E Multiple Expansion Why Stock Prices Are More Stretched Than You Think: A Tale Of 3 P/E Multiples Goldman: Entire SP Move Higher Is Due To Multiple Expansion; Shiller P/E Says 30% Overvalued So... Buy Midday Factoid: Market About to Hit 22x Forward P/E
标签: Magic经管大学堂：名校名师名课
京公网安备 11010802022788号
论坛法律顾问：王进律师
知识产权保护声明
免责及隐私声明
