S&P 500 Forward P/E Ratio
Chart of the Week for September 21, 2018 - September 27, 2018
The Price-Earnings Ratio (P/E) of equity securities is widely used by market participants for security valuation. P/E measures the current share price of a security relative to its earnings. P/E is also referred to as the "price multiplier" because it shows how much investors are willing to pay for a security per one dollar of earnings. The chart above shows the month-end P/E based on forward 12-month estimated earnings for the S&P 500 Index (SP 500), an index of large-cap securities that is a popular reference for equity market performance.
The monthly average value for the forward P/E over the period since August 2013 has been 16.25. Investors may consider stocks to be more expensive when the forward P/E is above its long-term average and less expensive when below its average. The intra-month high for the period was 18.47 in January 2018 and the intra-month low was 13.54 in September 2013. The U.S economy has generally been strong during the period, which has supported higher equity prices. Tax policy, including corporate tax cuts enacted earlier this year, has increased forward earnings estimates and contributed to the decrease in the forward P/E from January through May 2018. Recently forward P/E has risen, and the August 31st value was 16.83, slightly above the period average.
Posted by: sarah_oz@yahoo.com
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