The Amazing Valuation Journey

By on November 30, 2009

The Value Line Investment Survey has been around a long time. I grew up reading their reports since my father subscribed to it for many years. At their website readers are allowed a complimentary look at the 30 stocks that make up the Dow Jones Industrials. The charts and yearly earnings reveal how cheap the market for large caps is now compared to 1998 -2000.

For example, in 1999 the price of Wal-Mart stock hit a high of $70.30 and the company earned $1.28 per share, which works out to a PE multiple of 55. Wal-Mart is now trading at $54.63 and is expected to earn $3.62 per share; a PE multiple of 15. In other words, Wal-Mart is now making about three times more money than 10 years ago, but their stock is down 22%. The story is similar for Procter and Gamble, Coca Cola and a slew of other companies.

Lesson to Jeremy Siegel: growing earnings don’t always translate into growing stocks and when buying stocks investors should never ignore price and valuation.

Sources:

Value Line Complimentary Dow 30 Reports

Value Line Wal-Mart Report
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