While Sales and Earnings Growth Decline, US Stocks are Still Expensive

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While Sales and Earnings Growth Decline, US Stocks are Still Expensive

When considering the price you pay to get firms’ earnings, US equities remain richly valued, even though sales and earnings growth continue to head lower. The 12-month forward price/earnings ratio peaked for the S&P500 companies just below 20 in December 2017 and bottomed exactly a year later just above 15. The ensuing market rally has not been accompanied by a commensurate rise in earnings, as reflected in the P/E ratio, now just below 18. The Eurostoxx50 has shown similar characteristics, albeit to a lesser degree, with a reading just above 14, as at June 2019.


Forward PE
Source: Unigestion, Bloomberg. Data as at 17 July 2019.


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