Stock Market Briefing:
Valuation Ratios
Using Market Capitalization
Yardeni Research, Inc.
June 14, 2017
Dr. Edward Yardeni
516-972-7683
[email protected]
Joe Abbott
732-497-5306
[email protected]
Mali Quintana
480-664-1333
[email protected]
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Table Of Contents
Table Of Contents
Capitalization Ratios
June 14, 2017 / Valuation Ratios Using Market Capitalization
1-5
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Capitalization Ratios
Figure 1.
45.1
40.1
35.1
30.1
25.1
20.1
15.1
(trillion dollars, nsa, ratio scale)
May
US Equity Issues at Market Value
10.1
45.1
40.1
35.1
30.1
25.1
20.1
15.1
10.1
Total (40.8)
Total Ex Foreign Issues* (33.1)
5.1
.1
Q1
Q1
TOTAL VALUE OF US STOCKS
5.1
S&P 500 Market Cap** (20.7)
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.1
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
* Total excluding market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs)
by US residents.
** Quarterly from Q1-1964 through Q4-1989, and then monthly from January 1990.
Source: Federal Reserve Board, Financial Accounts of the United States.
Figure 2.
25
25
FOREIGN EQUITIES HELD BY US RESIDENTS
(as percent of total market value of equities held by US residents)
20
20
15
10
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Q1
Foreign Equities
Share in US* (18.7)
15
10
5
5
0
0
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
* Market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs) by US residents
as a percent of the market value of their total equity holdings.
Source: Federal Reserve Board, Financial Accounts of the United States.
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Capitalization Ratios
Figure 3.
40
40
RATIO MARKET VALUE US EQUITIES EX FOREIGN ISSUES*
TO AFTER-TAX CORPORATE PROFITS
30
30
Using After-Tax Profits
As Reported to IRS (19.1)
Based on Current Production** (21.1)
20
Q1
10
0
20
10
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0
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
* Total excluding market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs) by US residents.
** Including Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj), which restate the historical cost basis used in profits
tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP.
Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets.
Source: Federal Reserve Board, Financial Accounts of the United States.
Figure 4.
2.5
2.5
TOBIN’S Q FOR NONFINANCIAL CORPORATIONS*
(ratio)
2.0
2.0
Actual Q (1.04)
1.5
Adjusted Q** (1.45)
Q1
Q1
1.0
.5
.0
1.5
1.0
.5
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.0
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
* Ratio of the market value of equities to the net worth of corporations including real estate and structures at market value and equipment, intellectual
property products, and inventories at replacement cost.
** Actual divided by average since 1952.
Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets.
Source: Federal Reserve Board Financial Accounts of the United States.
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Capitalization Ratios
Figure 5.
2.5
2.5
STOCK MARKET CAPITALIZATION RATIOS
Q1
2.0
US Equity Market Capitalization Ex Foreign Issues*
(as a ratio of nominal GNP) (1.72)
S&P 500 Market Cap
(as a ratio of S&P 500 Revenues) (2.00)
1.5
2.0
Q1
1.5
1.0
1.0
.5
.5
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.0
.0
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
* Total excluding market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs) by US residents.
Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets.
Source: Federal Reserve Board Financial Accounts of the United States, Bureau of Economic Analysis, and Standard & Poor’s.
Figure 6.
2.5
2.5
STOCK MARKET CAPITALIZATION RATIOS
S&P 500 Market Cap
(as a ratio of S&P 500 Revenues) (2.00)
US Equity Market Capitalization Ex Foreign Issues*
(as a ratio of nominal GNP) (1.72)
2.0
Q1
2.0
Q1
1.5
1.5
1.0
1.0
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.5
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
.5
20
* Total excluding market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs) by US residents.
Source: Federal Reserve Board, Flow of Funds Accounts, Bureau of Economic Analysis, and Standard & Poor’s.
Page 3 / June 14, 2017 / Valuation Ratios Using Market Capitalization
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Capitalization Ratios
Figure 7.
2.1
2.1
S&P 500 PRICE-TO-SALES RATIO
Q1
2.0
S&P 500 Market Cap
(as a ratio of S&P 500 Revenues (2.00)
Forward P/S* (1.90)
1.9
1.8
2.0
May
1.9
1.8
1.7
1.7
1.6
1.6
1.5
1.5
1.4
1.4
1.3
1.3
1.2
1.2
1.1
1.1
1.0
1.0
.9
.9
.8
.8
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.7
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
.7
20
* S&P 500 index divided by 12-month forward consensus expected revenues per share for S&P 500.
Source: Thomson Reuters I/B/E/S and Standard & Poor’s.
Figure 8.
2.0
STOCK MARKET CAPITALIZATION RATIO & PRICE-TO-SALES-RATIO
2.0
6/8
Q1
1.5
1.5
1.0
1.0
US Equity Market Capitalization Ex Foreign Issues*
(as a ratio of nominal GNP) (1.72)
Forward P/S** (1.95)
.5
yardeni.com
93
94
95
.5
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
* Total excluding market value of holdings of foreign corporate equities, investment fund shares, and American Depositary Receipts (ADRs) by US residents.
** S&P 500 index divided by forward consensus expected revenues per share for S&P 500. Montly through 2005, then weekly.
Source: Federal Reserve Board Financial Accounts of the United States, Bureau of Economic Analysis, and Standard & Poor’s.
Page 4 / June 14, 2017 / Valuation Ratios Using Market Capitalization
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Capitalization Ratios
Figure 9.
20
2.0
S&P 500 VALUATION MEASURES
6/8
19
1.9
18
Forward P/E*
17
Forward P/S**
1.8
6/8
1.7
16
1.6
15
1.5
14
1.4
13
1.3
12
1.2
11
1.1
10
1.0
9
.9
8
.8
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7
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
.7
2018
* Price divided by forward consensus expected operating earnings per share. Monthly through 2005, then weekly.
** Price divided by forward consensus expected sales per share. Monthly through 2005, then weekly.
Source: Thomson Reuters I/B/E/S.
Page 5 / June 14, 2017 / Valuation Ratios Using Market Capitalization
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