Monday, July 18, 2016

Earnings Update

7 S&P 500 companies have reported Q2 earnings so far. 140 more will report this week.

With S&P 500 prices at close to record highs, price to earnings ratios are also at (expensive) recent highs: the backward looking, trailing 12 month P/E ratio is at 19.4 (the highest level since 2010):


The 15 year average is 17.6.

On December 31, 2015 the trailing 12 month P/E was 17.9. Since then S&P 500 prices ("P") are up 5.9%. Earnings ("E") are lower by 2.5%.

The more forward looking, (forward) 12 month P/E ratio is at
17.1, close to the high in May of 2015.


The 10 year average is 14.3.

The 12 month forward Earnings Per Share are unchanged from the fall of 2014, prices are higher by approx. 10%.

Earnings for Q2, 2016 are expected to have grown at a negative 5.5%. For all of 2016, at a level of +0.3%.

From a fundamental perspective this just shouts expensive, expensive, expensive! 

At the moment, however, there is more buying than selling and that is driving prices higher. Obviously the buyers are not so interested in the fundamentals.


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