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Valuation
Yardeni Research, Inc.
March 9, 2014
Dr. Edward Yardeni516-972-7683
eyardeni@yardeni.com
Mali Quintana480-664-1333
aquintana@yardeni.com
Please visit our sites atwww.yardeni.comblog.yardeni.com
thinking outside the box
Table Of Contents Table Of ContentsTable Of Contents
March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
P/E Ratios 1-2Growth vs Value P/Es 3Valuation: SVM-1 (Fed Model) 4-5Valuation: SVM-2 (Yardeni Model) 6Valuation: SVM-1 (S&P 400) 7Valuation: SVM-1 (S&P 600) 8Valuation: Equity Risk Premium 9Valuation: Rules of 20 10Valuation Models 11S&P 500 Forward Earnings 12S&P 500 Valuation 13S&P 500 Relative Valuation 14Relative Valuation: S&P 500 Growth vs. S&P 500 Value 15S&P 500 Sector P/Es 16-17Consumer Discretionary P/Es 18-19Consumer Staples P/Es 20Energy P/Es 21Financials P/Es 22Health Care P/Es 23Industrials P/Es 24Information Technology P/Es 25Materials P/Es 26Telecommunication Services & Utilities P/Es 27
Figure 1.
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 160
10
20
30
40
50
60
0
10
20
30
40
50
60
2/28
P/E RATIOS FOR S&P 500 Capped at 45due to extreme values
Using 4-quarter trailing reported earnings
Using S&P 500 forward earnings*
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data. Monthly data through April 1994,weekly thereafter.
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 160
10
20
30
40
50
60
0
10
20
30
40
50
60
Q3
US EQUITY MARKET CAPITALIZATION: NONFINANCIAL CORPORATIONS(as a ratio of NFC after-tax profits from current production*)
Capped at 50due to extreme values
NFC P/E
S&P 500 Trailing P/E**
S&P 500 Average P/E = 17.4
* Including IVA and CCadj. These two adjustments restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP.** Using four-quarter trailing reported earnings.
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 160
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
Q3
US EQUITY MARKET CAPITALIZATION EXCLUDING FOREIGN ISSUES
As a ratio of:__________
After-tax profits from current production* (Avg = 13.8)
Corporate Cash Flow** (Avg = 9.1)
* Including IVA and CCadj. These two adjustments restate the historical cost basis used in profits tax accounting for inventory withdrawals anddepreciation to the current cost measures used in GDP.** After-tax operating retained earnings plus tax-return-based depreciation.Source: Thomson Reuters I/B/E/S, US Department of Commerce, Bureau of Economic Analysis, Federal Reserve Board Flow of Funds Accounts,and Standard & Poor’s Corporation.
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P/E Ratios
Page 1 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 145
10
15
20
25
30
35
40
45
50
5
10
15
20
25
30
35
40
45
50
Feb
P/E RATIOS FOR S&P 500(using 12-month forward earnings*)
S&P 500
Technology
Ex Technology
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.Source: Thomson Reuters I/B/E/S.
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Figure 2.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20148
10
12
14
16
18
20
22
24
26
28
8
10
12
14
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22
24
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2/28
P/E RATIOS FOR S&P INDEXES*(weekly)
S&P 500 LargeCap
S&P 400 MidCap
S&P 600 SmallCap
* Price divided by 52-week forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
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Figure 3.
P/E Ratios
Page 2 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20155
10
15
20
25
30
35
40
45
5
10
15
20
25
30
35
40
45
Dec
FORWARD P/E RATIO*: S&P 500 CITIGROUP GROWTH vs. VALUE
Growth
Value
* Using consensus 12-month forward earnings forecasts.Source: Thomson Reuters I/B/E/S.
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Figure 4.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.7
.8
.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
.7
.8
.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
Dec
FORWARD PEG RATIO*: S&P 500 CITIGROUP GROWTH vs. VALUE
Growth
Value
* Forward P/E divided by LTEG: Using 5-year forward consensus expected earnings growth.Source: Thomson Reuters I/B/E/S.
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Figure 5.
Growth vs Value P/Es
Page 3 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 181
2
3
4
5
6
7
8
9
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18
1
2
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18
3/6
2/28
S&P 500 FORWARD EARNINGS YIELD & NOMINAL BOND YIELD
10-Year US TreasuryBond Yield
Forward Earnings Yield*
* 12-month forward consensus expected earnings divided by S&P 500 Index. Monthly through April 1994, weekly after.Source: Thomson Reuters I/B/E/S and Board of Governors of the Federal Reserve System.
yardeni.com
Figure 6.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 1875
1075
2075
3075
4075
5075607570758075
75
1075
2075
3075
4075
5075607570758075
3/7
2/28
STOCK VALUATION MODEL (SVM-1)(ratio scale)
Fair-Value Price*
S&P 500 Price Index
* 12-month forward consensus expected earnings divided by 10-year US Treasury bond yield. Monthly through April 1994, weekly after.Source: Thomson Reuters I/B/E/S and Board of Governors of the Federal Reserve System.
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Figure 7.
Valuation: SVM-1 (Fed Model)
Page 4 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 8.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16-100
-80
-60
-40
-20
0
20
40
60
80
100
-100
-80
-60
-40
-20
0
20
40
60
80
100
2/28
STOCK VALUATION MODEL #1 (SVM-1)*(weekly, percent)
Overvalued
Undervalued
* Ratio of S&P 500 Index to its fair value (52-week forward consensus expected S&P 500 operating earnings per share divided by the 10-year US Treasury bond yield). Monthly through April 1994, weekly thereafter.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1651015202530354045505560657075
51015202530354045505560657075
2/28
2/28
FORWARD P/E & BOND YIELD (SVM-1)(weekly)
Bond’s P/E=Reciprocal Of10-Year US Treasury Bond Yield
Ratio Of S&P 500 Price To Expected Earnings*
* 52-week forward consensus expected S&P 500 operating earnings per share. Monthly through March 1994, weekly thereafter.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 160102030405060708090100110120130
0102030405060708090
100110120130
2/27
3/6
MARKET’S ESTIMATE OF EARNINGS (SVM-1)(weekly, dollars per share)
S&P 500 Forward Earnings_____________________
Market’s Estimate*
Analysts’ Estimate**
* S&P 500 index multiplied by 10-year government bond yield. Monthly through March 1994, weekly thereafter.** 12-month forward consensus expected S&P 500 operating earnings per share. Monthly through March 1994, weekly thereafter. Source: Standard & Poor’s Corporation and Thomson Reuters I/B/E/S.
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Valuation: SVM-1 (Fed Model)
Page 5 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 9.
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14-100
-50
0
50
100
-100
-50
0
50
100
Feb
STOCK VALUATION MODEL #2 (SVM-2)*(percent)
Overvalued
Undervalued
* Ratio of S&P 500 index to its fair value (12-month forward consensus expected S&P 500 operating earnings per share divided by the difference between Moody’s A-rated corporate bond yield less fraction [0.10] of 5-year consensus expected earnings growth).
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14150
2150
4150
61508150
150
2150
4150
61508150
Feb
.10
.20
.25STOCK VALUATION MODEL (SVM-2)(ratio scale)
5-year earningsgrowth weight_____________
.25
.20
.10
Actual S&P 500
Fair Value S&P 500*
* Fair value is 12-month forward consensus expected S&P 500 operating earnings per share divided by the difference between Moody’s A-rated corporate bond yield less fraction (as shown above) of 5-year consensus expected earnings growth.
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
.5
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1.5
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3.5
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5.0
5.5
2/28
ADDITIONAL VARIABLES IN SVM-2
Corporate A-rated yield* less 10-year Treasury yield
0.1 times long-term consensusexpected earnings growth
*Moody’s corporate A monthly through 1987, then weekly through 2005. Beginning in 2006 S&P corporate A. Source: Moody’s Investors Service and Thomson Reuters I/B/E/S.
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Valuation: SVM-2 (Yardeni Model)
Page 6 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 10.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-100
-80
-60
-40
-20
0
20
40
60
-100
-80
-60
-40
-20
0
20
40
60
2/28
STOCK VALUATION MODEL #1 (SVM-1)*(weekly, percent)
Overvalued
Undervalued
* Ratio of S&P 400 Index to its fair value (52-week forward consensus expected S&P 400 operating earnings per share divided by the 10-year US Treasury bond yield).
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201451015202530354045505560657075
51015202530354045505560657075
2/28
2/28
FORWARD P/E & BOND YIELD (SVM-1)(weekly)
Bond’s P/E=Reciprocal Of10-Year US Treasury Bond Yield
Ratio Of S&P 400 Price To Expected Earnings*
* 52-week forward consensus expected S&P 400 operating earnings per share.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
2/27
3/7
MARKET’S ESTIMATE OF EARNINGS (SVM-1)(weekly, dollars per share)
S&P 400 Forward Earnings_____________________
Market’s Estimate*Analysts’ Estimate**
* S&P 400 index multiplied by 10-year government bond yield.** 52-week forward consensus expected S&P 400 operating earnings per share. Source: Standard & Poor’s Corporation and Thomson Reuters I/B/E/S.
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Valuation: SVM-1 (S&P 400)
Page 7 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 11.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-100
-80
-60
-40
-20
0
20
40
60
-100
-80
-60
-40
-20
0
20
40
60
2/28
STOCK VALUATION MODEL #1 (SVM-1)*(weekly, percent)
Overvalued
Undervalued
* Ratio of S&P 600 Index to its fair value (52-week forward consensus expected S&P 600 operating earnings per share divided by the 10-year US Treasury bond yield).
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014510152025303540455055606570
510152025303540455055606570
2/28
2/28
FORWARD P/E & BOND YIELD (SVM-1)(weekly)
Bond’s P/E=Reciprocal Of10-Year US Treasury Bond Yield
Ratio Of S&P 600 Price To Expected Earnings*
* 52-week forward consensus expected S&P 600 operating earnings per share.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
2/27
3/7
MARKET’S ESTIMATE OF EARNINGS (SVM-1)(weekly, dollars per share)
S&P 600 Forward Earnings_____________________
Market’s Estimate*
Analysts’ Estimate**
* S&P 600 index multiplied by 10-year government bond yield.** 52-week forward consensus expected S&P 600 operating earnings per share. Source: Standard & Poor’s Corporation and Thomson Reuters I/B/E/S.
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Valuation: SVM-1 (S&P 600)
Page 8 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-2
0
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-2
0
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2/28
Feb
S&P 500 EARNINGS YIELD & REAL BOND YIELD
10-year US Treasury Bond Yield MinusAverage Expected CPI Inflation RateFor Next 10 Years (Phili Fed Survey)*
S&P 500 ExpectedEarnings To Price Ratio**
10-Year TIPS Yield***(weekly)
* Data from 1979 to 1991 quarterly, monthly thereafter.** Earnings-price ratio is based on the Thomson Reuters I/B/E/S consensus estimates of earnings over the coming 12 months.
*** Yields on Treasury inflation protected securities (TIPS) adjused to constant maturities.Source: Board of Governors of the Federal Reserve System, US Treasury, Thomson Reuters I/B/E/S, and Federal Reserve Bank of Philadelphia.
yardeni.com
Figure 12.
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-1
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Q4
S&P 500 EARNINGS YIELD MINUS REAL BOND YIELD*
* S&P 500 forward expected earnings to price ratio minus 10-year Treasury bond yield minus average expected CPI inflation rate for next 10 years(Phili Fed Survey).Source: Board of Governors of the Federal Reserve System, US Treasury, Thomson Reuters I/B/E/S, and Federal Reserve Bank of Philadelphia.
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Figure 13.
Valuation: Equity Risk Premium
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Yardeni Research, Inc.
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 172
4
6
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28
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S&P 500 Price toExpected Earnings Ratio*
(blue line)
20 Minus 10-Year US TreasuryBond Yield(red line)
RULE OF 20: FORWARD P/E VS BOND YIELD
2/28
2/28
* Using four-quarter trailing reported earnings per share from 1965 to September 1978. Then 12-month forward consensus expected S&P 500 operatingearnings per share from October 1978 through March 1994, weekly after.Note: Shaded areas are periods when S&P 500 fell 15% or more.Source: Thomson Reuters I/B/E/S and Board of Governors of the Federal Reserve System.
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Figure 14.
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1510
15
20
25
30
10
15
20
25
30
Jan
S&P 500 FORWARD P/E PLUS CONSUMER PRICE INDEX (yearly percent change)
StocksOvervalued
StocksUndervalued
Source: Thomson Reuters I/B/E/S and US Department of Labor, Bureau of Labor Statistics.
yardeni.com
Figure 15.
Valuation: Rules of 20
Page 10 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
5
10
15
20
25
5
10
15
20
25
Feb
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14.6
.8
1.0
1.2
1.4
1.6
1.8
.6
.8
1.0
1.2
1.4
1.6
1.8
Feb
S&P 500 INDEX
P/E*
LTEG**
PEG***
* P/E = price-to-earnings ratio using mid-month price and 12-month forward consensus earnings expectations.** LTEG = consensus median 5-year expected earnings growth.
*** PEG = P/E divided by LTEG.Source: Thomson Reuters I/B/E/S.
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Figure 16.
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18.0
.5
1.0
1.5
2.0
2.5
.0
.5
1.0
1.5
2.0
2.5
Q4
Q4
TOBIN’S Q FOR NONFINANCIAL CORPORATIONS*(ratio)
Actual Q
Adjusted Q**
* Ratio of market value of equities to net worth at market value, which includes real estate (including structures) at market value and equipment,software, and inventories at replacement cost.
Source: Federal Reserve Board Flow of Funds Accounts.** Actual divided by average since 1952.
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Figure 17.
Valuation Models
Page 11 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 18.
2006 2007 2008 2009 2010 2011 2012 2013 2014 20155
15
25
3545
2/2713 1415CONSUMER DISCRETIONARY
(S&P 500 forward earningsby sector)
Annual consensusestimatesForward earnings
2006 2007 2008 2009 2010 2011 2012 2013 2014 201513
18
23
28
33
2/271314 15INDUSTRIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 201512
16
20
24
28
32
2/2713 1415CONSUMER STAPLES
2006 2007 2008 2009 2010 2011 2012 2013 2014 201515
25
35
45
55
2/271314 15
INFORMATION TECHNOLOGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 201520
30
40
50
6070
2/27
1314 15
ENERGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 20156
11
16
21
26
2/27
13 14 15MATERIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
18
28
384858
2/2713 1415
FINANCIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 20156
8
10
12
14
2/27
1314
15TELECOMMUNICATIONS SERVICES
2006 2007 2008 2009 2010 2011 2012 2013 2014 201520
25
30
35
40
4550
2/271314
15HEALTH CARE
Source: Thomson Reuters I/B/E/S.
2006 2007 2008 2009 2010 2011 2012 2013 2014 201511
12
13
14
15
152/2713 14
UTILITIES
yardeni.com
S&P 500 Forward Earnings
Page 12 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
Figure 19.
2006 2007 2008 2009 2010 2011 2012 2013 2014 201510
15
20
25
30
35
2/27
CONSUMER DISCRETIONARY(S&P 500 forward P/Es by sector)
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
11
14
17
20
2/27
INDUSTRIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 201510
12
14
16
18
20
2/27
CONSUMER STAPLES
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
10
12
14
16
18
20
22
24
2/27
INFORMATION TECHNOLOGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 20154
6
8
10
12
14
16
2/27
ENERGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
10
12
14
16
18
20
22
24
2/27
MATERIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 20156
8
10
12
14
16
18
20
2/27
FINANCIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
10
12
14
16
18
20
22
2/27
TELECOMMUNICATION SERVICES
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
10
12
14
16
18
20
2/27
HEALTH CARE
Source: Thomson Reuters I/B/E/S.
2006 2007 2008 2009 2010 2011 2012 2013 2014 20158
10
12
14
16
18
20
2/27
yardeni.com
UTILITIES
S&P 500 Valuation
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Yardeni Research, Inc.
Figure 20.
2006 2007 2008 2009 2010 2011 2012 2013 2014 20151.0
1.5
2.0
2.5
2/27
CONSUMER DISCRETIONARY(S&P 500 relative forward P/Es by sector)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.6
.8
1.0
1.2
1.4
2/27
INDUSTRIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.8
1.0
1.2
1.4
1.6
2/27
CONSUMER STAPLES
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.8
1.0
1.2
1.4
1.6
2/27
INFORMATION TECHNOLOGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.5
.6
.7
.8
.9
1.0
1.1
2/27
ENERGY
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.75
1.00
1.25
1.50
1.75
2/27
MATERIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.6
.8
1.0
1.2
1.4
2/27
FINANCIALS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.75
1.00
1.25
1.50
1.75
2/27
TELECOMMUNICATION SERVICES
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.6
.8
1.0
1.2
1.4
2/27
HEALTH CARE
* Sector’s forward P/E divided by S&P 500 forward P/E. Source: Thomson Reuters I/B/E/S.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015.7
.8
.9
1.0
1.1
1.2
1.3
2/27
yardeni.com
UTILITIES
S&P 500 Relative Valuation
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Yardeni Research, Inc.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013.80
.85
.90
.95
1.00
1.05
1.10
1.15
.80
.85
.90
.95
1.00
1.05
1.10
1.15
Overvalued
Undervalued
Dec
RELATIVE VALUATION OF S&P 500 GROWTH(ratio)
Normalized Relative P/E*
Average**
+1/-1 Std. Dev**
* Normalized Relative P/E is relative P/E divided by the prior 36 month average of the relative P/E. Relative P/E is P/E divided by P/E of S&P 500.** The average and standard deviation is based on the monthly Normalized Relative P/E values spread over the last 10 fiscal years.
Source: Thomson Reuters I/B/E/S.
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Figure 21.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013.90
.95
1.00
1.05
1.10
1.15
.90
.95
1.00
1.05
1.10
1.15
Overvalued
Undervalued
Dec
RELATIVE VALUATION OF S&P 500 VALUE(ratio)
Normalized Relative P/E*
Average**
+1/-1 Std. Dev**
* Normalized Relative P/E is relative P/E divided by the prior 36 month average of the relative P/E. Relative P/E is P/E divided by P/E of S&P 500.** The average and standard deviation is based on the monthly Normalized Relative P/E values spread over the last 10 fiscal years.
Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 22.
Relative Valuation: S&P 500 Growth vs. S&P 500 Value
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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
10
15
20
25
30
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S&P 500 FORWARD P/E RATIOS*
S&P 500 Index (15.2)
Consumer Staples (16.7)
Financials (12.9)
Health Care (17.1)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 23.
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S&P 500 FORWARD P/E RATIOS*
S&P 500 Index (15.2)
Consumer Discretionary (17.9)
Information Technology (14.8)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 24.
S&P 500 Sector P/Es
Page 16 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS*
S&P 500 Index (15.2)
Energy (13.1)
Industrials (16.1)
Materials (16.3)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 25.
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S&P 500 FORWARD P/E RATIOS*
S&P 500 Index (15.2)
Telecommunication Services (13.2)
Utilities (15.4)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 26.
S&P 500 Sector P/Es
Page 17 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS* CONSUMER DISCRETIONARY
Consumer Discretionary Sector (17.9)
Advertising (17.5)
Auto Parts & Equipment (14.4)
Automobile Manufacturers (9.7)
Publishing (19.0)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 7 and 35 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 27.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P FORWARD P/E RATIOS:* CONSUMER DISCRETIONARY
Consumer Discretionary Sector (17.9)
Casinos & Gaming (23.1)
Hotels, Resorts & Cruise Lines (21.4)
Movies & Entertainment (17.4)
Restaurants (19.4)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 40 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 28.
Consumer Discretionary P/Es
Page 18 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P FORWARD P/E RATIOS:* CONSUMER DISCRETIONARY
Consumer Discretionary Sector (17.9)
Apparel, Accessories, & Luxury Goods (18.1)
Apparel Retail (17.0)
Footwear (23.0)
Leisure Products (14.5)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 29.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160
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S&P 500 FORWARD P/E RATIOS:* CONSUMER DISCRETIONARY
Consumer Discretionary Sector (17.9)
Computer & Electronics Retailers (10.6)
Home Improvement Retailers (18.1)
Homebuilding (15.3)
Household Appliances (11.2)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 5 and 40 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 30.
Consumer Discretionary P/Es
Page 19 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS:* CONSUMER STAPLES
Consumer Staples Sector (16.7)
Household Products (17.8)
Packaged Foods & Meats (17.4)
Personal Products (18.9)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 31.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* CONSUMER STAPLES
Consumer Staples Sector (16.7)
Brewers (13.7)
Drug Retail (16.5)
Soft Drinks (17.4)
Tobacco (14.5)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 32.
Consumer Staples P/Es
Page 20 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS:* ENERGY
Energy Sector (13.1)
Integrated Oil & Gas (11.9)
Oil & Gas Refining & Marketing (9.5)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 33.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160
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S&P 500 FORWARD P/E RATIOS:* ENERGY
Energy Sector (13.1)
Oil & Gas Drilling (9.7)
Oil & Gas Equipment & Services (14.4)
Oil & Gas Exploration & Production (15.1)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 34.
Energy P/Es
Page 21 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20164
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S&P 500 FORWARD P/E RATIOS:* FINANCIALS
Financials Sector (12.9)
Asset Management & Custody Banks (14.1)
Diversified Banks (11.7)
Investment Banking & Brokerage (12.5)
Other Diversified Financial Services (10.0)
Regional Banks (12.2)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 20 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 35.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160
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S&P 500 FORWARD P/E RATIOS:* FINANCIALS
Financials Sector (12.9)
Insurance Brokers (16.3)
Life & Health Insurance (9.3)
Multi-Line Insurance (10.6)
Property & Casualty Insurance (11.0)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 36.
Financials P/Es
Page 22 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS:* HEALTH CARE
Health Care (17.1)
Biotechnology (22.8)
Health Care Equipment (16.5)
Managed Health Care (12.0)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 37.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* HEALTH CARE
Health Care (17.1)
Health Care Distributors (16.8)
Health Care Facilities (23.3)
Pharmaceuticals (16.7)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 7 and 35 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 38.
Health Care P/Es
Page 23 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS:* INDUSTRIALSIndustrials Sector (16.1)
Construction & Farm Machinery & Heavy Trucks (14.3)
Industrial Conglomerates (15.7)
Industrial Machinery (17.8)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 39.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* INDUSTRIALSIndustrials Sector (16.1)
Aerospace & Defense (15.8)
Electrical Components & Equipment (17.1)
Environmental & Facilities Services (18.7)
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 40.
Industrials P/Es
Page 24 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
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S&P 500 FORWARD P/E RATIOS:* INFORMATION TECHNOLOGYInformation Technology Sector (14.8)
Application Software (38.6)
Data Processing & Outsourcing (20.4)
IT Consulting & Other Services (11.8)
Systems Software (13.0)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 7 and 50 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 41.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* INFORMATION TECHNOLOGY
Information Technology Sector (14.8)
Communications Equipment (12.7)
Computer Hardware (11.1)
Computer Storage & Peripherals (12.1)
Semiconductor Equipment (14.5)
Semiconductors (15.0)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 7 and 55 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 42.
Information Technology P/Es
Page 25 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160
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S&P 500 FORWARD P/E RATIOS:* MATERIALS
Materials Sector (16.3)
Aluminum (29.4)
Paper Products (12.6)
Steel (17.4)
* Price divided by 12-month forward consensus expected operating earnings per share.P/E capped at 5 and 40 for all industries.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 43.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* MATERIALS
Materials Sector (16.3)
Diversified Chemicals (14.8)
Industrial Gases (19.3)
Specialty Chemicals (21.4)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 44.
Materials P/Es
Page 26 / March 9, 2014 / Valuation www.yardeni.com
Yardeni Research, Inc.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* TELECOMMUNICATION SERVICES
Telecommunication Services Sector (13.2)
Integrated Telecommunication Services (12.5)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 45.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20165
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S&P 500 FORWARD P/E RATIOS:* UTILITIES
Utilities Sector (15.4)
Electric Utilities (14.7)
Gas Utilities (15.8)
* Price divided by 12-month forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 46.
Telecommunication Services & Utilities P/Es
Page 27 / March 9, 2014 / Valuation www.yardeni.com
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