Crazy P/E Ratios
The average 2009 estimated P/E ratio for stocks in the S&P 500 is 11.9. Currently, 48% of stocks in the index have an estimated P/E of less than ten. Below we highlight stocks with the lowest estimated P/E ratios in the S&P 500. Either earnings estimates are still way too high, or many of these stocks are trading at values of a lifetime. Just looking at the top three stocks on the list (GNW, X, CF), even if their '09 earnings come in at half of current estimates, at current prices their P/Es would still be less than five.
Those PE ratios will look much different in 12 months when those companies earnings decline by 50%.
Posted by: Owner Earnings | October 08, 2008 at 09:16 AM
Those are largely commodities stocks, and it would be interesting to see their PEs based on forward estimates at the bottom of the 10-15 year price ranges.
Posted by: Murray | October 08, 2008 at 10:04 AM
P.e. for value will be 6 to 9 and growth stock will have p.e.'s in the tweenies,and a 4% div. yes aapl,goog,msft, etc ,etc will have to pay a real div.
Posted by: dj | October 08, 2008 at 10:39 AM
Historic buying opportunities occur when trailing PE's are below 10.
Posted by: Eric | October 08, 2008 at 10:46 AM
Thanks for your continuing good work. I read you often. But I have to disagee completly with your take on PE's No way is this the buy of a lifetime. Problem is people use operating earnings and this is in no way a true pe. Based on GAAP earnings we are way overvalued. Thanks, Mike Pitre.
Posted by: Michael Pitre | October 08, 2008 at 11:29 AM
How about most of them have negative earnings at the time you look them again?
Posted by: Wayne | October 08, 2008 at 08:50 PM
How many of these companies will be bankrupt within 24 months? Looking down the list I see a lot of banks, companies in dying industries and heavily leveraged cos that will have a hard time borrowing more money in this environment.
Posted by: CL | October 10, 2008 at 11:22 PM
"Those PE ratios will look much different in 12 months when those companies earnings decline by 50%."
Did you even read the article? The P/Es on these would be about 10 even after halving the earnings.
None of the scared chickens would buy any of these stocks would be 0.5
I bet ya they'd handily hand over their money after any of them went up 20% though.
Posted by: Muzie | October 23, 2008 at 07:35 PM