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S&P 500 pe ratio is currently 47

  1. woddonnee

    5,382 posts.
    G'day
    Thats according to elliotwave.com any way.
    cheers
    Rod

    I realize that the question of "how to look at corporate earnings" sounds about as interesting as watching grass grow in the winter. But please stick with me. Today did see news that's relevant to investors.

    Earnings are supposed to be an objective way to value a company's stock price, even to value an entire stock index like the S&P 500. Yet the bubble years helped turn earnings into a shell game. Several earnings formulas became popular that allowed companies to exclude, or to overstate, certain numbers. In turn the companies could report earnings that left investors with (shall we say) the desired impression.

    Yet a move by Standard & Poor's today may have made it a bit harder for companies to play the earnings shell game, by publishing what it calls "core earnings" for its own S&P 500 index. The core earnings formula is far more honest than the "desired impression" variety.

    Over the four quarters that ended this past June 30, core earnings for companies in the S&P 500 was $18.48 per share. Using that number, today's P/E ratio is about 47.

    By contrast, Wall Street often emphasizes "operating earnings," which on June 30 was $41.58 per share, and reflects a P/E ratio today of 21.

    The lower the P/E ratio, the more likely you are to hear the "experts" say that stocks are "undervalued."

    Now, don't expect the shell game to disappear overnight. Bullish psychology explains why companies do this, bullish psychology explains why investors swallow it, and there's still plenty of bullish psychology around.

    Let us show you the opportunities that psychology will create in the near-term, and the long-term as well.


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