About this web site
This web site shows three types of quarterly earnings for the S&P 500 index
members from the
S&P 500 Earnings and Estimate Report: reported earnings, bottom-up
operating earnings, and top-down operating earnings. The real-time
S&P 500 index price comes from Yahoo Finance
and is used to calculate the price earnings ratio ("P/E ratio") for each
four quarter (12 month) period and for each of the three earnings types.
The main difference between operating earnings and reported earnings is that operating
earnings exclude write-offs. Bottom up earnings are calculated from the numbers
provided by analysts of individual companies. Top down earnings are calculated from
economic indicators.
Operating earnings have usually been similar to reported earnings in the past. However
due to recent housing and credit write-offs, there has been a large divergence of
operating earnings from reported earnings. To comply with
Generally Accepted Accounting Principles, reported earnings should be
the number that is used.
Charlie Minter and Marty Weiner of Comstock
Partners states in their article
What is the Real P/E Ratio?:
Using "operating earnings" would be akin to playing in a major golf tournament
that doesn’t count any penalty strokes for hitting the ball in a hazard or
out of bounds."
The P/E ratio is the price that stock buyers are collectively willing to pay per
dollar of earnings in a stock (or group of stocks like the S&P 500). It may
be used as an indication of demand, sentiment or relative risk appetite.
Comparing P/E ratios of different stocks may indicate whether a stock is undervalued
or overvalued relative to each other. Comparing P/E ratios with historical values
or averages may indicate whether a stock or stocks are historically undervalued.
Based on data from Ned Davis Research:
As of 2008-06-31, using reported earnings:
the 25 year average P/E ratio is 20.89
the 50 year average P/E ratio is 17.67
the 82.3 year average P/E ratio is 15.96
As of 2008-01-31, using operating earnings:
the 25 year average P/E ratio is 17.98
the 50 year average P/E ratio is 16.23
the 81.9 year average P/E ratio is 15.91
The S&P 500 earnings & P/E ratios page
shows the latest reported earnings per share and operating earnings per share numbers
and and corresponding real-time P/E ratios.
The Historical S&P 500 earnings & P/E
ratios page provides charts showing how reported earnings and operating earnings and corresponding
P/E ratios have varied historically.
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