P/E Ratio – Over Or Under Valued Now?
The following was written by Charlie over at Comstock:
IF YOU WATCH OR READ OR LISTEN TO BUSINESS NEWS, you must be getting very confused about whether the stock market is undervalued or overvalued. The bulls who appear on the financial shows assert that the stock market is inexpensive: “This market is as cheap as it has been for the past two decades — or the past 18 years.” They also may state that the price-earnings ratio, at 13 to 16 estimated earnings for 2008 or 2009, is below the long-term norm.
Their statements are correct.
At other times during the same day, you may hear a bearish market maven try to convince the interviewer that the market is substantially overvalued and has a long way to go on the downside before it gets to fair valuation. The bearish interviewee will either discuss why the P/E ratio at over 21 times 2008 earnings estimates or 24 times the latest 12-months earnings is closer to valuations found near market tops, rather than market bottoms.
![[pic]](http://s.wsj.net/public/resources/images/BA-AM536_OV_min_20080523190514.jpg "P/E Ratio Over Or Under Valued Now?") |
| Stuart Goldenberg |
These analysts are also correct.
Interviewers seldom if ever question the disparities in the various market analysts’ approaches to valuation. But we will try to clear it up.
Read the entire article over at Barrons by clicking HERE
I don’t know enough to say if individual companies are over or under valued, however anyone I know who has been involved in the market for more than a decade or two will admit that they could have substantially lower P/Es in general.