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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Rock_nj who wrote (83882)	6/13/2003 7:29:29 PM
From: Dinesh	Respond to of 99985

That "E" in P/E is pretty hard to nail down. Comparing forward PE to historical PE makes it even harder to compare. Furthermore, as the definition of "E" keeps on shifting, comparison becomes even more decidedly meaningless. If you still cared, given the volume of fin. restatements, acctg probes and all that sort of stuff, one must also look for the probability of the stated "E" being the truthful one. And work out an expected E. The "P" too seldom goes in a straight path. EV may be a better measure as it normalizes a company with tons of cash against one leveraged to the hilt. I'm not saying that PE is all crap. The concept is fine but we've come a long way since then! -d

To: Rock_nj who wrote (83882)	6/16/2003 12:46:39 PM
From: Bill Martin	Respond to of 99985

Re: Isn't the market way overvalued here? I mean isn't the forward P/E on the S&P 500 something like 30+, when historically its been closer to 15 or so.... There are lots of ways to measure SP500 PE and the value depends who is doing the forward earnings estimates. To avoid some of that clutter I tend to watch the ValueLine PE as a market proxy. At least there's just one organization using one set of methods to compare all stocks. Anyhow, the VL currently shows a market PE of 16.8 for all stocks which have earnings. That doesn't seem all that outrageous to me. As they do it, this uses two trailing quarters of earnings and two future quarter estimates I believe. They claim the market low PE by their approach was 15.4 and the high was 20.9 so 16.8 is comfortably in the middle somewhere and not terribly over bought IMHO. Your mileage may vary.... Bill