mi sa che sta roba la legga altro che me tapino...
Crestmont Research P/E Ratio (from Crestmont Research)
Basic methodology: Investors like profits, and they are willing to pay a certain amount of money for a certain amount of profits. That ratio has a fairly constant long-term average, so we can tell how far above or below that average we are. Thus, we can estimate whether the value of the S&P 500 is currently too high (“expensive”), just right (“fair”) or too low (“cheap”).
What It’s Telling Us Right Now: According to this method,
at the end of February 2013, the S&P 500 was 58% higher than it should be (versus 55% higher one month ago) based on historical average price-to-earnings ratios. This is a significant deviation from normal, suggesting that stocks are generally too “expensive” right now.
Cyclical P/E 10 Ratio
Basic methodology: This is similar to the Crestmont method above with a couple of exceptions. The two methods have different ways of calculating the earnings (“E”) component of the P/E Ratio. Also, if you do a best-fit (“regression”) line through the value of P/E 10 ratio over time, it’s sloped upwards, which means that over time, the average P/E 10 ratio has been rising. As of the end of December 2012, I’m going to look at how much higher/lower the P/E 10 ratio is versus the
regression line, not just the historical average of P/E 10. It makes the market less “expensive” to do this, but I also truly feel there may be something to the notion that things have changed over time.
What It’s Telling Us Right Now: According to this method,
at the end of February 2013, the S&P 500 is 35% higher than it should be (versus 34% higher one month ago) based on historical price-to-earnings ratios (actually a best-fit line showing where that average should be today). This is a deviation from normal, suggesting that stocks are generally too “expensive” right now. In fact, according to
GuruFocus, based on the P/E 10 ratio as of the time of this posting, the S&P will rise at annual rate of only 2.3 percent for the next several years – very anemic growth.
And now, the last two methods for determining stock market fair value:
Q Ratio
Basic methodology: It looks at the ratio between the current price of the market and how much it would cost to replace all of the assets owned by all the companies in the S&P 500. It gets too difficult to explain just how they do this, so just accept it and see what the results say. If you must know, go to Hardnomics.com (just kidding, I hope there’s no such site!)
What It’s Telling Us Right Now: According to this method,
at the end of February 2013, the S&P 500 is 42% higher than it should be (versus 39% higher one month ago) based on historical average. This is a significant deviation from normal, suggesting that stocks are generally too “expensive” right now.
Comparison to Trend
Basic methodology: Looks at the price of the S&P 500 on a chart from the beginning (around 1870) through today. A “best fit” straight line (called “regression trendline”) is drawn to cut through all the price points. That represents where the S&P 500 “should” be to represent a market fair value level.
What It’s Telling Us Right Now: According to this method,
at the end of February 2013, the S&P 500 is 54% higher than it should be (versus 52% higher one month ago) based on its long-term trend. This is a significant deviation from normal, suggesting that stocks are generally too “expensive” right now.
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