Here is a quick discussion on multiples from our Strategist, Bob Swanson.
Recently, some attention has been placed on market valuation. Here we attempt to relate valuation to subsequent equity performance. The most common measure of valuation is the price to earnings ratio (P/E). Cambridge evaluates both the historical and projected P/E ratios. Today’s P/E ratio, based on the prior 12 months, is 17.9x while the 12-month forward P/E is 16.5x. Both of these measures are slightly above historical averages as seen in the chart below.