Don’t Look Now But the Stock Market Is Actually Getting Cheap

On Friday, the S&P 500 closed below 1,300 for the first time since January. Looking at the numbers, the market is a pretty decent value. Wall Street currently expects 2012 earnings of $104.97, and earnings for 2013 of $118.92. That means the S&P 500 is going for just under 11 times next year’s earnings. Bear in mind that the yield on the 10-year Treasury is at 70-year lows.

One big hitch is that Wall Street expects to see earnings growth reaccelerate later this year. Notice how the yellow earnings line bumps up this summer. This reacceleration is hardly a given and it depends on how quickly Europe can recover.

Another plus in the market’s favor is the resurgence of dividends. The S&P 500 will probably pay out $29.74 this year. Going by Friday’s close, that’s a yield of 2.30%.

Posted by on May 21st, 2012 at 9:56 am


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