With earnings season upon us, it’s time to review market valuation from a trailing and forward perspective. Based on S&P’s forward operating earnings out to 2014, the market is reasonably valued at 13.6x. But this requires sharp EPS projections as detailed below. Today’s trailing multiple is 17x, near the high end of the historic range if one excludes the bubble years from 1997-2002. Time will tell whether today’s projections are realistic. Meanwhile, the market seems vulnerable to any disappointment in reported earnings or forward guidance. Projections begin to accelerate sharply in Q3 2013 as highlighted below.
© Charter Trust Company
