Though they trade at a lower price to
its forward earnings multiple than at any time since Facebook went public, in 2012, the overall picture is one of astonishing growth and wealth.
At 13 times
forward earnings, Apple already suffers from the lowest relative valuations within the cohort, and is even lower than the greater S&P 500's multiple of 17 times, so any multiple expansion would be welcomed.
That means Take - Two stock is trading at essentially 20 times
forward earnings.
Given the company's diverse business lines, projected better environment for financials over the next twelve months and low valuations the market multiple could easily improve to a conservative 12 times
forward earnings.
When I started in the business, even a simple screen of ranking an industry on P / E basis on
forward earnings produced interesting results.
Figure out the change in 12 - month
forward earnings estimates.
This helps to explain why
forward earnings estimate remain important, as illustrated by FactSet.
currently trades at 15.3 times current earnings and 12.9 times
its forward earnings.
Historically, the market multiple forward multiple for the S&P has averaged about 15 times
forward earnings today.
The equity market is not cheap at 17.5 times
forward earnings.
If you used
forward earnings or Treauries, the so - called Fed model, you would get an even larger discrepancy.
Still,
forward earnings are forecast to be even stronger, and it's that combination of factors that initially drew me to the business.
If those estimates panned out, the S&P on Friday would have traded at what looks like a bargain multiple of about 9.3 times
forward earnings.
In other words, analyst estimates produced by Wall Street, and the problem with
those forward earnings estimates is that they are very frequently so dead wrong as to be irresponsible.
One is that, when people talk about valuations, they tend to be talking about
forward earnings.
There is a constant drumbeat of criticism about market valuation using
forward earnings.
Those interested in
forward earnings are taking the aggregate work of dozens of specialists.
Jeff Miller weighs in at A Dash of Insight with a critique of the Shiller PE10 as an alternative to
forward earnings estimates:
Check
their forward earnings growth.
The benchmark index is trading at 17.2 times
forward earnings compared with 18.5 times for the S&P 500.
The many market commentators who view current stock prices as cheap, comparing
forward earnings to interest rates, are doing something akin to the Fed model, but without citing it explicitly.
He uses information about past earnings and economic trends to create a model for
forward earnings.
This explanation would alleviate the concern that earnings expectations were too high, and that markets were overvalued even on
forward earnings (see:
Forward Earnings Imply a Return To Near - Record Profit Margins).
3M and fellow high - quality multi-industrial company Illinois Tool Works have been treading on historical heady
forward earnings multiples recently, and that's still the case now.
12 month backwards earnings had peaked months before October 2007 (when the stock market peaked), but
forward earnings lagged backwards earnings.
Analysts tend to ratchet up
their forward earnings expectations as the stock market goes up.
Home Depot trades at 17 times
forward earnings estimates, and about 16 times expected 2013 cash flow.
I reckon 20 *
forward earnings is cheap for a company that can grow like that for 20 years.
There are several variations on this popular fundamental ratio, including using trailing twelve - month earnings per share, one - year
forward earnings per share estimate, and the use of enterprise value instead of market price.
The present environment is characterized by unusually overvalued, overbought, overbullish conditions, with rising 10 - year Treasury bond yields, heavy insider selling, valuations on «
forward earnings» appearing reasonable only because profit margins are more than 70 % above historical norms (fully explained by the negative sum of government and personal savings as a share of GDP), with the S&P 500 at a 4 - year market high, in a mature market advance, with lagging employment indicators still positive but more than half of all OECD countries already in GDP contraction, Europe in recession, Britain on the cusp, and the EU imposing massive losses on depositors in order to protect lenders in an unstable banking system where Cyprus is the iceberg's tip.
The «fair value» calculation is just
the forward earnings divided by the ten - year rate.
«Not at 100 times
forward earnings.
Third, the price to
forward earnings ratio shows that the market is overvalued by 8 %.
However, UVV has no projected
forward earnings and earnings growth is projected to decline next year; therefore, it was eliminated from the list.
In addition, stocks were required to have projected
forward earnings, which potentially eliminates stocks with dividend growth at immediate risk.
The analysts» record of forecasting Kohl's 1 year forward and 2 year
forward earnings has been good, but far from perfect.
Analysts» record of forecasting
forward earnings 2 years out for Omega have been very high.
Me, a value investor thought that buying a company at 55 % of liquidation value, and a single digit multiple of
forward earnings would do fine.
As we discussed in Quantitative Value, analysts are consistently too optimistic about the future, and so systematically overestimate
forward earnings figures.
Companies are valued off of
forward earnings.
The forward earnings estimate is the worst performed metric by a wide margin.
Investors are wise to shy away from analyst
forward earnings estimates when making investment decisions.
-LSB-...] lets you know, for example, that using
forward earnings estimates is a bad idea.
I'm just making the point that the more predictive price ratios (Shiller PE, Tobin's q etc), which are well above their long - run averages, all disagree with the PEs based on
forward earnings estimates from overoptimistic analysts» forecasts.
The performance of
the forward earnings estimate is uniformly poor, earning a compound annual growth rate of just 8.63 percent on average and underperforming the Standard & Poor's (S&P) 500 by almost 1 percent per year.
My piece on S&P 500
forward earnings estimates and the overvaluation of the market generated a number of heated emails and comments.
The assumed one - to - one correspondence between
forward earnings yields and 10 - year Treasury yields is a statistical artifact of the period from 1982 to the late 1990's, during which U.S. stocks moved from profound undervaluation (high earnings yields) to extreme overvaluation (depressed earnings yields).
-LSB-...] Research lets you know, for example, that using
forward earnings estimates is a bad idea.
I wish that Andrade et al had not muddied the results by testing both «fresh» / unlagged data and
forward earnings.
It turns out that the correlation of the Fed Model with subsequent one - year S&P 500 total returns is only 23 % — regardless of whether one looks at the period since 1948 (which requires imputed
forward earnings since 1980), or the period since 1980 itself.