Les Jones

S&P 500 earnings in the gutter; index overvalued

Wednesday, May 27th, 2009 | Economics |

Via Mish, cratering earnings estimates for 2009 show that the S&P is wildly overvalued:

In Is That Recovery We See? John Mauldin posted the following chart of earnings estimates.

The S&P closed Thursday at 888. That’s a richly priced PE of 31. Let’s assume that earnings recover to $48. That’s still a richly priced PE of 18.5. A bear market bottom might sport a PE of 10-12 but let’s be generous and use 15.

15*$28.51 would put the S&P 500 at 382!
Let’s be more generous and use an earnings estimate of $48.
15*$48 would put the S&P 500 at 720!

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