This article is a guest contribution by Doug Short, dshort.com.
I post a monthly market valuation update based on the cyclical P/E ratio using the 10-year average of as-reported earnings (see Is the Stock Market Cheap?). I use "As Reported" earnings because it factors in write-offs and restructuring charges and it is consistent with the historical data popularized by Yale professor Robert Shiller's research. My source for the most recent earnings is the Standard & Poor's Excel file maintained by Senior Index Analyst Howard Silverblatt. It's available on the Standard & Poor's website (free registration required). The numbers I want are in column D on the ESTIMATES&PEs tab.
The quarterly earnings for the most recent completed quarter are adjusted several times a month, and there are as-reported earnings for the next several quarters (currently through 2011), also subject to frequent revisions. My monthly update includes a table showing the earnings for most recent quarters and the estimates for the rest of the year. I also include monthly earnings numbers using a linear interpolation for the two months between the quarters.
This morning I downloaded the latest Silverblatt numbers, dated July 30th, and I noticed a change in the as-reported earnings estimates from the previous spreadsheet dated June 21st. See the table below for a comparison of the two (note: each number is the sum of the current quarter and the previous three).
That 4.5% increase for Q2 is good news. To put that into context, based on yesterday's close of 1120.46, the P/E ratio based on the trailing 12-month (TTM) earnings for Q2 is the difference between a P/E of 16.8 (latest earnings) versus 17.6 (July 21 earnings). Incidentally, the average TTM P/E for the S&P Composite since 1871 is 15.5. Also encouraging is the rise in as-reported earnings estimates for the next two quarters.
"As Reported earnings estimates" ā that's a bit of an oxymoron, isn't it?
Copyright (c) Doug Short
