Valuation

Oppenheimer's Carter Worth made some observations yesterday about the market's valuation.  I thought I would put up his basic statistics as a measuring rod as we begin the 4th quarter.  Remember I think stocks may be choppy and weak this month as investors wait the results of the elections but after that I think there is a real possibilyt that stocks move higher into year's end. 

*As of October 1st, the total value of the U.S. equity market stands at some $12.8 trillion, with the companies in the S&P 500 representing 81% of the total with a value of $10.4 trillion.

*The market's growth characteristics - and the valuation thereof - are as follows:

· The S&P 500 is trading at a price/earnings multiple of 14.9 on a trailing 12-month basis and a price/earnings multiple of 13.1 on a forward 12-month basis.

· The earnings growth rate of the companies comprising the S&P 500 is 27% on a trailing 12-month basis and is projected by First Call to be 13% in the coming 12 months.

· The price-to-cash flow ratio for the S&P 500 is currently 9.3 (versus a 20-year median price-to-cash flow ratio of 10.3).

· The price-to-sales ratio is 1.2 (versus a 20-year median of 1.3).

· The return on equity of the companies comprising the S&P 500 is running at 14.9% (versus a 20-year median ROE for the SPX of 15.1%).

Source:  C.B. Worth, "Money in Motion,"  Oppenheimer & Co. Inc.   October 4, 2010, page 1.  Data courtesy of Standard & Poor's and Thomson Reuters