The following table contrasts
current stock valuations of the top five tech stocks with those during the turn - of - the - century bubble.
While we would agree that
current stock valuation levels in the US are somewhere between the upper end of fair value and expensive, we maintain a neutral weight position.
We can quantify the impact that zero interest rates should have on stock valuations, and it would take decades of zero interest rate policy to
justify current stock valuations on the basis of low interest rates.
Unfortunately, at this particular juncture in the bull market cycle,
current stock valuations suggest that it is quite possible, if not probable, that the asset class will lose HALF of its value in the next bear market.
The current stock valuation implies the market expects Oracle's ROIC to continue to decline.
Cash will again be king as the market will more narrowly focus on awarding value only to the stocks that can generate cash flows in excess of what
their current stock valuation implies.
The current stock valuation implies that Interactive Intelligence will grow revenues at a significantly faster pace than consensus expectations for over two decades.
How does
the current stock valuation reflect future earnings?
Bond prices may actually be less frothy than
current stock valuations.
Despite 15 percent growth,
current stock valuations are barely justified and drift sideways for a 0 percent gain for the year.
This would mean the DDM would have to be calculated again to find
a current stock valuation as the yield went up.