That means that looking
at the past earnings and making a judgement about the future are key to a good asset valuation.
But that's the sort of patient investment opportunity where people were looking
at the past earnings and saying, gee, everything that can go wrong goes wrong and will continue to go wrong, failing to appreciate that change.
Not exact matches
Pierlot wrote a paper for the CD Howe Institute in 2011 showing that a person with a salary of $ 75,000
at the end of a 35 - year career would accumulate more than $ 1.4 million in savings through a defined - benefit plan (wherein the pensioner is paid a set income based on
past earnings and years of service, mostly confined to the public sector these days) compared to $ 674,711 for someone with no pension but a maxed - out Registered Retirement Savings Plan.
Looking
at annual price returns over the
past 60 years, Bloomberg data show that annual price returns have been roughly 5 percent when the starting valuation on the S&P 500 was above the long - term median, roughly 16.5 x trailing
earnings.
Even his preferred option would result in retail banking
earnings growth
at the Big Six to slow to 3.2 % over the next two years, compared to 8.4 % over the
past two, he says.
According to a Bain analysis, 45 % of TSR growth
at publicly traded global healthcare companies over the
past five years came from an expansion of price - to -
earnings multiples — that is more than growth from either revenue or
earnings.
The US market is looking the most expensive to us
at a time when US corporate
earnings are already well
past their prior peaks.
Even industry competitors — like Ford, which trades
at a ratio of 6.6, and Toyota, which trades
at 9.7 times — trade
at higher multiples, and GM's average price -
earnings ratio over the
past five years is 12.2.
Over the
past four years, the increase in average hourly
earnings has been the slowest since
at least the mid 1960s (Graph 3).
An investor would be well served to ignore the buy, sell or hold recommendation S&P attaches to each of the reports, instead looking
at the growth in
earnings, debt levels and the return on equity rates for
past several years.
The
earnings and revenues of $ MX have ramped up over the
past three quarters, and the ROE (return on equity) is
at an impressive 35 %.
Earnings edged
past expectations as well, landing
at $ 0.64 per share.
After underperforming the S&P 500 by nearly 60 % over the
past two years, CVS is now valued
at less than 12x next year's consensus
earnings after adding back amortization of intangible assets.
The advance would persist, even intensify, as the afternoon moved further along, with strong
earnings enabling traders to look
past the recently higher yields,
at least for one day.
And unlike during
past runs in technology stocks, many of these companies have actual
earnings and cash flows that can support reinvestment in their businesses, which in turn makes them less reliant on raising capital in the markets
at a time when interest rates are climbing.
As John Shrewsberry, chief financial officer
at Wells Fargo, put it in the company's most recent
earnings call: «As we've talked about in the
past, we are trying not to compete on price and that's what you're seeing across the rest of the industry.»
S&P 500
earnings are presently right
at the 6 % line that connects historical
earnings peaks across economic cycles going back cleanly over the
past century.
The extraordinary tightness in the labour market has intensified in recent months; the unemployment rate,
at 4.5 per cent in July, has now been below 5 per cent for the
past year and
earnings growth has picked up accordingly.
The S&P 500 trades today
at just 15.6 times average estimated
earnings — well below the average P / E of 18.6 times
earnings during periods when inflation was
at similarly muted levels in the
past 57 years...
No less a value conscious investor than Warren Buffett commented on this shift
at the most recent Berkshire Hathaway annual meeting, where he pointed to the fact that the largest companies in the S&P 500; Apple, Microsoft, Amazon, Facebook, and Google generate far more cash per dollar of
earnings than companies of the
past.
First, it's great for investors to have an idea of what «multiple range» a company has traded
at in the
past — there's a lot of value to this, and most relevant for cyclical firms (mainly industrials) that may, from a fundamental standpoint, exhibit similar (but not identical) patterns with respect to both
earnings and their PE through the course of each economy cycle: think Boeing (BA) and the commercial aerospace cycle; Ford (F) and consumer demand for auto sales; or United Continental (UAL) with respect to premium air travel demand.
In addition, the unrepatriated
past foreign
earnings back to 1986 are taxable, and
at a higher rate than we initially estimated.
QCOM's
earnings growth has been incredible over the
past 5 years, coming in
at 32.7 %.
Rent growth is pacing almost a full percentage point behind the overall rate of inflation, which stands
at 2.4 percent as of the latest data release, and is even further behing the growth in average hourly
earnings which have increased by 2.7 percent over the
past twelve months.
The analysts pointed out that «
past transactions in the Australian dairy segment have been executed
at 8 to 12 times EBITDA [
earnings before interest, tax, depreciation and amortisation], though in the last decade the range is more like 10.5 to 13.0 times on comparable consumer - facing businesses.»
While X-Men: The Last Stand managed to make more on its opening weekend, Days of Future
Past has almost equaled that film in overall domestic
earnings with $ 233,921,535
at the box office.
4) Now look
at your actual writing
earnings over the
past twelve months from all sources (not just Amazon).
On the subject of valuations, I believe that the peak level of
earnings seen in the
past market cycle was somewhat high, so I'd agree with Bill Gross
at PIMCO in the sense that we're not likely to see that level of
earnings as the «norm.»
We'll look into the discount brokerage
earnings that were released this
past week, some new research products launched being launched for investors, and what looks like a new project under development
at a popular discount broker.
The bulls argue that this premium is justified (or non-existent) because interest rates are low,
earnings will stay elevated because US companies earn a greater share of income internationally, and the market has peaked
at higher Shiller PEs in the
past: 1929 peaked 33x, 2000 peaked
at 44x, Japan got to 100x in the 1990s, and China has traded
at 100x this year.
Emerson has grown its
earnings per share
at about 6 % annually for the
past 5 years, and analysts» estimates for the next 5 years are for 8 % average annual growth.
The stocks should also have positive
earnings over the
past 12 months and should have a market cap of
at least $ 1 billion with an average daily trading volume of
at least 200,000 shares.
JP Morgan's Thomas Lee notes that if the S&P
earnings yield merely equaled the high yield bond (a frequent
past metric), the S&P 500 would be
at 1600.
For context, Walgreens has traded
at an average price - to -
earnings ratio of 16.7 over the
past ten years.
The risks are material if this bear market was to end
at the average price - to - peak
earnings multiple of
past recessionary troughs.
Out of 9,194 stocks tracked by Standard & Poor's Compustat research service, 3,518 are now trading
at less than eight times their
earnings over the
past year — or
at levels less than half the long - term average valuation of the stock market as a whole.
For instance, take a look
at Suncor's
earnings over the
past few years.
In the
past, the kiddie tax applied to
earnings that were taxed
at the parents» tax rate.
They have demonstrated excellent
earnings and dividend growth over the
past 5 years and currently trade
at a PE ratio of 12; lower than 90 % of the companies in their industry.
DIV STRK is consecutive years of dividend increases; DIV YLD is yield using the most recently announced dividend; 5 YR YLD is average dividend yield over the
past 5 years; REC DG is most recent year - over-year dividend growth; 5 YR DG is average annual dividend growth over the
past 5 years; PRICE was
at market close Friday, March 2; FAIR VAL is Morningstar's «Fair Value Estimate»; FWD P / E is price /
earnings ratio based on projected 2018
earnings; 5 YR P / E is average P / E ratio over the
past 5 years; MOAT is Morningstar's rating of competitive economic advantage; SFT is Value Line's «Safety» score; CRD is Standard & Poor's credit rating; MKT CAP is market cap in billions of dollars.
But if you are looking out over the next five to ten years, I would recommend being patient and waiting
at least until the stock trades
at less than 20x
earnings: History shows that opportunity shows up with quite a bit of regularity, even if the
past two years don't feel like it.
Third, it has
earnings growth resulting in
at least one - third raise in EPS in the
past 10 years.
With this first article, I will look
at super-fast
earnings growth of 20 % or better,
past and future.
• Stable
earnings growth in the last 20 years (correlation
at least 0.8 out of 1.0) • Yearly
earnings growth in the last 5 years
at least 5 percent on average • Stable dividend growth in the
past (correlation
at least 0.9 out of 1.0) • Yearly dividend growth in the last 5 years
at least 5 percent on average • No decreasing dividends for
at least 10 years • Positive outlook for the
earnings of the next business year
Not a single one showed that Shiller or Hussman or anyone else who specializes in a 20 - 20 view of the
past was better
at forecasting future
earnings.
This report presented essential «fundamentals
at a glance» illustrating the
past and present valuation based on
earnings achievements as reported.
Earnings have grown every year for
at least the
past 10 years but the stock just never responded until the
past couple years.
At this point, we're long
past my original (
earnings & cash based) Intrinsic Fair Value target, so it's only logical to opt for my Relative Fair Value target (3.5 Price / Sales & Cash, based on comparable M&A multiples — which, frankly, I've never really understood — again, see my original TRIB post).
Looking back
at our best investments from the
past year, none of them would have looked cheap on the basis of superficial ratios (each of the successes mentioned above would have been trading
at large multiples of both
earnings and assets
at the start of the year).
Pepsi has historically traded
at a price /
earnings ratio range of 13 to 24 in the
past ten years.