18 times earnings on SP500. Book value makes up almost 30% of total SP500 market cap. That brings PE to about 11.5 on Market Cap - Assets. Figure earning are reduced 20% from non cash expenses. That would bring cash earnings to about 10 times price. Then figure in a 2% dividend and you really have the SP500 selling for about 8 times of market value - assets. This equates to about a 12% earning yield or about 150% more than a 10 year bond. Is the market really this cheap?
2007-06-12 04:25:12 · 4 answers · asked by UtopianIdeals 2 in Business & Finance ➔ Investing
The P/E ratio is published because it has been published for a long time and people expect it. It has been shown to have no predictive value. Markets with high P/Es can still go higher and low P/E markets can still go lower.
2007-06-12 05:33:57 · answer #1 · answered by Ted 7 · 0⤊ 0⤋
But if Price to Earnings rises 5% then the book value of 40% of the Dow Jones will decrease sporadically. If you look at Current Ratios vs. Inventory you will see that the flux capicitor is not a real invention and that the stock market really is what it is, just a big bowl of bannana pudding.
2007-06-12 04:31:53 · answer #2 · answered by Joseph T 4 · 0⤊ 0⤋
I agree with your numbers. The market is undervalued but that means nothing. People are trading on geo-political emotions, not numerical valuations.
I think we're looking at a 5% dip sometime in the next few months. Then it's time to load up the boat.
2007-06-12 04:46:12 · answer #3 · answered by Anonymous · 0⤊ 0⤋
i'll answer this question in 6 months, 1 year and 10 years from now... talk to you later.
2007-06-12 04:29:06 · answer #4 · answered by Ryan S 3 · 0⤊ 0⤋