To avoid overpaying for trending companies, stocks must be trading near or below their 10Y
historical median valuations (measured here by Price to Sales, Price to Earnings, and Price to Book).
Not exact matches
The 2002 - 2003 lows never actually reached even average
valuations, much less
historical medians, but we did observe enough value based on normalized fundamentals and improved market action to remove most of our hedges in early 2003.
If you look at
historical market data, over two - thirds of the best 30 weeks, for example, have occurred in periods when market
valuations were below their
historical medians.
In actuality, the
median constituent of the S&P 500 has a Forward P / E of 18.4 — a multiple that rests in the 99th percentile of
historical valuation levels.
The equal - weight strategy, priced just below its
median historical valuation in the United States, is in the top quintile of its
historical valuation in developed ex U.S. and emerging markets.
They found that that the
median stock in the S&P 500 trades in the 99th percentile of
historical valuation for forward price - to - earnings (P / Es) ratios.
Last week I ran a post about the
median stock trading at an all - time high
valuation that included this chart from «Millennial Investor» Patrick O'Shaughnessy showing
historical EBITDA yields for all stocks in the universe greater than $ 200 million market capitalization from the period 1971 to date: