Home » Posts tagged 'p/e ratio'
Tag Archives: p/e ratio
Believing The Impossible
silenceofmind.com
Believing The Impossible
“Alice laughed: “There’s no use trying,” she said; “one can’t believe impossible things.”
“I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”
~ Lewis Carroll, Through The Looking Glass
To borrow from Lewis Carroll: To have confidence in today’s central bank-created bubble markets, we have to believe in six impossible things.
Thing 1: Fundamentals Don’t Matter.
In our brave new world of money printing to infinity, we’re supposed to buy into a “new paradigm” story. You know, that It’s different this time.
Spoiler alert: It never is.
Companies either make money or they don’t. They’re either good investments or they aren’t. They’ll either return risk-adjusted cash to you over time, or they won’t.
Here’s a simple exercise. Using a publicly available stock screener at Finviz.com, a favorite site of mine, I set two filter parameters to obtain a list of companies that have::
- A market cap of over $2B
- A P/E ratio in excess of 50x
These are the biggest companies that, in theory at least, require investors to wait 50 years (or more) to be paid back in profits for each dollar invested.
236 companies fit this description right now. 236!
Here’s a screenshot of page 11 of the results. Every company listed here has a P/E multiple of over 190(!).
(Source – here’s the exact screen I used, so you can troll the results for yourself)
Again, these sky-high ratios mean that investors are willing to wait more than 190 years for these companies to earn back their principal at current stock earnings prices.
…click on the above link to read the rest of the article…
A Murderous Complacency
murder: a flock of crows
~ Miriam-Webster dictionary
Many view the appearance of crows as an omen of death because ravens and crows are scavengers and are generally associated with dead bodies, battlefields, and cemeteries, and they’re thought to circle in large numbers above sites where animals or people are expected to soon die.
~ “Nature”, PBS.org
Running PeakProsperity.com requires me to read and process a lot of data on a daily basis. As it’s hard to digest it all in real-time, I keep a running list of charts, tables and articles that catch my attention, to return to when I have the time to give them my full focus.
Lately, that list has been getting quite long. And it’s largely full of indicators that concern me; signals that the long era of “extend and pretend” in today’s markets may finally be at its terminus.
Like crows circling overhead, every day brings with it new worrisome statistics that portend an ill change ahead. Indeed, these omens are increasing so quickly now that it’s hard not to feel like Tippi Hedren in Hitchcock’s suspense classic The Birds:
So what are the data that make me think these crows will soon be feasting on the carcass of the great bull market that has powered stock, bonds, real estate and most other asset classes to record highs since 2009?
Rogue’s Gallery
Complacent Investors
Investors have enjoyed remarkably gentle treatment by the stock markets over the past half-decade. Retracements have occurred much less frequently than historical norms, and have been shallow and short-lived when they happened.
Tom Lee, head of research at Fundstrat and often referred to as “Wall Street’s biggest bull” notes that 2016 was the mildest year on record for the S&P 500, with only 7 days in which the index traded at less than 3% of its 52-week high.
…click on the above link to read the rest of the article…
Peak Financial Engineering? Trends Spiral South
Peak Financial Engineering? Trends Spiral South
Our corporate heroes hit a snag.
We have long grinned painfully at the ways in which Corporate America and analysts collude to present the quarterly earnings charade in the rosiest light possible. But now, it seems they have reached the end of their magic tricks, and reality is showing through in an increasingly terrible trend.
Analysts concoct sky-high earnings-per-share expectations for quarters in the distant future to obtain “forward-looking,” pro-forma, adjusted, ex-bad-items fictional P/E ratios that they then bandy about to raise “price targets” and justify ludicrous stock valuations.
As the actual quarter draws nearer, these earnings expectations get whittled down to where very little earnings growth is left, if any. This way, corporations have a good chance of beating them, and thus propping up their stocks via an “upside earnings surprise.” If they get it right, it works like a charm.
Over the past four years, 72% of the S&P 500 companies have managed to report higher earnings per share than the analysts’ mean estimates at the time, according toFactSet. And so earnings growth has been on average 2.9 percentage points higher than the mean estimate at the beginning of the quarter, “due to the large number of upside earnings surprises,” as FactSet puts it.
Now the bad news. Currently the S&P 500 companies are projected to report a year-over-year decline in earnings of 4.4% for the second quarter, on a revenue decline of 4.2%. Of the companies in the index, 24 have already reported, which nudged up the estimates at the beginning of Q2, when the earnings decline was pegged at 4.5%.
So everything is estimated to head south. Companies are blaming the dollar, in addition to the weather and a slew of other things. Instead of losing value as it had been for years, the dollar has regained some inconvenient oomph. And inflation has been too low for our corporate heroes.
…click on the above link to read the rest of the article…
