P/E ratios climbing faster than earnings
The forward price-to-equity ratio for the S&P 500 index was about 19.5 midday Thursday, while the forward earnings estimate for the index was about $174 a share. The P/E ratio is up 17% from a year ago while earnings estimates are up 4%.
The jump in overall earnings growth is an improvement over much of 2019 that saw expectations slow to a near standstill in November (0.32% year-over-year growth) after 2019's fourth quarter correction. P/E ratios, on the other hand have risen sharply in the past months driven by demand for U.S. equities. The forward P/E ratio year-over-year growth fell for 13 straight months from February 2018 to February 2019.
Currently, Amazon.com is sporting a tech bubble-like valuation of 94.35 based on its current price and trailing 12-month earnings. Its forward P/E ratio is a more reasonable 55.2.