Valuation Ratios Using Market Capitalization - Yardeni Research

Stock Market Briefing: Valuation Ratios

Using Market Capitalization

Yardeni Research, Inc.

December 7, 2023

Dr. Edward Yardeni

516-972-7683 eyardeni@

Joe Abbott

732-497-5306 jabbott@

Mali Quintana

480-664-1333 aquintana@

Please visit our sites at blog.

thinking outside the box

Table Of Contents Table Of Contents

Capitalization Ratios

1-5

Buffett Ratio

6-7

December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Capitalization Ratios

Figure 1.

100.1

80.1 TOTAL VALUE OF US STOCKS 60.1 (trillion dollars, nsa, ratio scale)

40.1

20.1

US Equity Issues at Market Value

Total (70.1)

Total Ex Foreign Issues* (60.4)

S&P 500 Market Cap** (38.3)

100.1 Q3 80.1

60.1 Nov 40.1

20.1



.1

.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 24 26

* 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

Q3 15



10

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 24 26

* 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.

Page 1 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Capitalization Ratios

Figure 3.

40

RATIO MARKET VALUE US EQUITIES EX FOREIGN ISSUES* TO AFTER-TAX CORPORATE PROFITS

30

Using After-Tax Profits

As Reported to IRS (20.8)

20

Based on Current Production** (23.2)

40 30 Q2 20

10

10



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 24 26

* 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.

Figure 4.

4.5

4.5

TOBIN'S q FOR NONFINANCIAL CORPORATIONS

4.0

(ratio)

4.0

3.5

3.5

3.0

3.0

Actual q*

Adjusted q**

2.5

2.5

2.0

Q2 2.0

1.5

Q2 1.5

1.0

1.0

.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 24 26

* 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: Flow of Funds.

Page 2 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Capitalization Ratios

Figure 5.

3.75

3.75

3.50

STOCK MARKET CAPITALIZATION RATIOS (quarterly)

3.50

3.25

3.25

3.00

2.75

S&P 500 Market Cap

(as a ratio of S&P 500 Revenues) (2.3)

2.50

US Equity Market Capitalization Ex Foreign Issues*

(as a ratio of nominal GNP) (2.2) 2.25

3.00 2.75 2.50 Q2 2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75

.50

.50

.25

.25



.00

.00

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 24 26

* Total excluding market value of holdings by US residents of foreign corporate equities, investment fund shares, and ADRs. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: Federal Reserve Board, Bureau of Economic Analysis, and Standard & Poor's.

Figure 6.

3.75

3.75

STOCK MARKET CAPITALIZATION RATIOS

3.50

3.50

3.25

S&P 500 Market Cap

3.25

(as a ratio of S&P 500 Revenues) (2.31)

3.00

US Equity Market Capitalization Ex Foreign Issues*

3.00

(as a ratio of nominal GNP) (2.22)

2.75

2.75

2.50

2.50

2.25

Q2

2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75



.50

.50

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 20 21 22 23 24 25

* 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 are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: Federal Reserve Board, Flow of Funds Accounts, Bureau of Economic Analysis, and Standard & Poor's.

Page 3 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Capitalization Ratios

Figure 7.

3.75

3.75

S&P 500 PRICE-TO-SALES RATIO

3.50

3.50

S&P 500 Market Cap

3.25

(as a ratio of S&P 500 Revenues (2.31)

3.25

3.00

Forward P/S* (2.38)

3.00

2.75

2.75

2.50

2.50

Nov

2.25

2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00



.75

.75

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 20 21 22 23 24 25

* S&P 500 index divided by 12-month forward consensus expected revenues per share for S&P 500. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: I/B/E/S data by Refinitiv and Standard & Poor's.

Figure 8.

3.00

STOCK MARKET CAPITALIZATION RATIO

2.75

vs S&P 500 PRICE-TO-SALES-RATIO

2.50

2.25

2.00

US Equity Market Capitalization Ex Foreign Issues* (as a ratio of nominal GNP)

Forward P/S**

3.00

2.75

2.50 11/30

Q2

2.25

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75



.50

.50

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 20 21 22 23 24 25

* Total excluding market value of holdings by US residents of foreign corporate equities, investment fund shares, and ADRs. ** S&P 500 index divided by S&P 500 year-ahead forward analysts' consensus expected revenues per share. Monthly through 2005, then weekly.

Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: Federal Reserve Board, Bureau of Economic Analysis, and Standard & Poor's.

Page 4 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Capitalization Ratios

Figure 9.

24

23 S&P 500 VALUATION MEASURES

22

21 Forward P/E* (18.9)

20

3.0

2.8

2.6

11/30

2.4

19

Forward P/S** (2.4)

2.2

18

2.0

17 1.8

16

15

1.6

14

1.4

13

1.2

12 1.0

11

10

.8



9

.6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

* 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.

Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: I/B/E/S data by Refinitiv.

Figure 10.

3.75

STOCK MARKET CAPITALIZATION RATIO & PRICE-TO-SALES-RATIO

3.50

3.25

3.00

S&P 500 Market Cap

(as a ratio of S&P 500 Revenues) (2.31)

2.75

Forward P/S* (2.41)

2.50

2.25

3.75

3.50

3.25

3.00

2.75

2.50

11/30

Q2

2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75



.50

.50

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 20 21 22 23 24 25

* S&P 500 index divided by forward consensus expected revenues per share for S&P 500. Monthly through 2005, then weekly. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: I/B/E/S data by Refinitiv and Standard & Poor's.

Page 5 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



Buffett Ratio

Figure 11.

3.75

3.75

3.50 STOCK MARKET VALUATION RATIOS

3.50

3.25

3.25

S&P 500 Market Cap

3.00

(as a ratio of S&P 500 Revenues) (2.3)

3.00

2.75

US Equity Market Capitalization Ex Foreign Issues*

2.75

2.50

(as a ratio of nominal GNP) (2.2)

2.50

2.25

Q2 2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75

.50

.50

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 20 21 22 23 24

3.75

3.75

3.50

3.50

3.25

3.25

3.00

S&P 500 Market Cap

3.00

2.75

(as a ratio of S&P 500 Revenues) (2.3)

2.75

2.50

Forward P/S** (2.4)

2.25

12/7

2.50

2.25

2.00

2.00

1.75

1.75

1.50

1.50

1.25

1.25

1.00

1.00

.75

.75

.50

.50

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 20 21 22 23 24 25

27

3.0

2.9

25

2.8 2.7

2.6

23 Forward P/E** (19.1)

21

2.5 12/7 2.4

2.3 2.2

Forward P/S** (2.4)

2.1

19

2.0

1.9

1.8

17

1.7

1.6

15

1.5 1.4

1.3

13

1.2

1.1

11

1.0 .9

.8

9

.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 20 21 22 23 24

* Total excluding market value of holdings by US residents of foreign corporate quities, investment fund shares, and ADRs. ** S&P 500 index divided by forward consensus expected revenues or earnings per share for S&P 500. Monthly through 2005, then daily.

Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets.

Page 6 / December 7, 2023 / Valuation Ratios Using Market Capitalization

Yardeni Research, Inc.



 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download