Monday, March 20, 2017

Factset earnings update

Factset updated its Earnings Insights

Earnings Growth: For Q1 2017, the estimated earnings growth rate for the S&P 500 is 9.0%. If 9.0% is the actual growth rate for the quarter, it will mark the highest (year-over-year) earnings growth for the index since Q4 2011 (11.6%).

Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.8. This P/E ratio is above the 5-year average (15.0) and above the 10-year average (13.9).

It is worth also to take a look at earnings analysis Just to put this into a longer term context:

I think one important factor is not taken into account here, the historically low interest rates. We know from CAPM that it must result in higher P/E ratios. This post on Damodaram Online suggests an alternative approach in this ultra low yield environment, comparing stock P/E to Bond P/E.

This suggests that we aren't on a bubble territory yet.

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