“S&P 500 companies are now trading at about 12.3 times estimated 2011 earnings, according to Thomson Reuters data. Since 1960 the price to earnings ratio has been about 16.4, according to Bespoke Investment Group, which suggests that stocks today are a relative steal.”
I know Rich had an article about this subject a while back (upper right box)
So Rich, or anyone, are US stocks now underpriced?
It seems hard to believe with the recent increases in stock prices and all the bad economic news. When I search the web for this number, I get different answers. What is the right number?
P/E ratio’s are calculated as (Current Stock Price) / (Earnings over the past year). Historically, an average of 16.4 is probably about right.
The article uses 2011 ESTIMATED earnings to calculate the P/E ratio. So they are talking about FUTURE earnings; not PAST earnings. You can’t compare an estimated future P/E ratio (which is effectively a guess) against historical P/E ratio’s.
P/E ratio’s are calculated as (Current Stock Price) / (Earnings over the past year). Historically, an average of 16.4 is probably about right.
The article uses 2011 ESTIMATED earnings to calculate the P/E ratio. So they are talking about FUTURE earnings; not PAST earnings. You can’t compare an estimated future P/E ratio (which is effectively a guess) against historical P/E ratio’s.
P/E ratio’s are calculated as (Current Stock Price) / (Earnings over the past year). Historically, an average of 16.4 is probably about right.
The article uses 2011 ESTIMATED earnings to calculate the P/E ratio. So they are talking about FUTURE earnings; not PAST earnings. You can’t compare an estimated future P/E ratio (which is effectively a guess) against historical P/E ratio’s.
P/E ratio’s are calculated as (Current Stock Price) / (Earnings over the past year). Historically, an average of 16.4 is probably about right.
The article uses 2011 ESTIMATED earnings to calculate the P/E ratio. So they are talking about FUTURE earnings; not PAST earnings. You can’t compare an estimated future P/E ratio (which is effectively a guess) against historical P/E ratio’s.
P/E ratio’s are calculated as (Current Stock Price) / (Earnings over the past year). Historically, an average of 16.4 is probably about right.
The article uses 2011 ESTIMATED earnings to calculate the P/E ratio. So they are talking about FUTURE earnings; not PAST earnings. You can’t compare an estimated future P/E ratio (which is effectively a guess) against historical P/E ratio’s.
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