The Great PE Compression

The folks at "Chart of the Day" do a great job reducing statistical concepts to pictures. Every Friday they publish a free chart to the public. Today they discuss a theme familiar to our clients about Price to Earnings multiple compression.

"Today's chart illustrates that the recent growth in earnings has led to a significantly lower PE ratio. In fact, the PE ratio is currently within the confines of a tight and very steep downtrend. So while the significant earnings growth of late is a plus, the market does not appear willing to pay more for each dollar of earnings."

You can see the illustration of this posted at http://www.chartoftheday.com/20060825.htm?T