Stocks Are Facing Both Earnings Headwinds and a Compression in the P/E Ratio

These multiples have begun to reverse after a 12-year period where they slowly expanded, in some cases dramatically.

The period after the Great Financial Crisis has not only seen cheap money, it has seen a dramatic expansion of the Fed's balance sheet, now at close to $9 trillion. Netflix is a good example of extreme multiple compression: It is now trading for the same price it traded at in the second quarter of 2020, yet the multiple — the value an investor is willing to put on a future stream of earnings — is much lower today. It is now trading for 34 times 2022 estimates; in 2020, it was trading at 88 times 2020 earnings. Two years prior, the multiple was even higher: 174 times 2018 earnings, according to Factset.

With multiples contracting, and earnings growth much more modest, many strategists are understandably concerned that the market is vulnerable. First, companies are reporting more"normal" earnings beats. In 2021, it was not unusual to see companies reporting earnings 20% above what analysts were expecting.Of the roughly 60 companies that have reported so far, 76% are beating estimates, according to The Earnings Scout. That is high but well below the 88% beat rates from the prior quarter. More importantly, they are beating by only 7.4%, well below the 15% beat rates those companies reported last quarter.

"Actual earnings growth is decelerating and will last at least two more quarters," Nick Raich from The Earnings Scout said in a note to clients last week."Furthermore, our research indicates Fed interest rate hikes are not baked into 2H of 2022 EPS estimates yet either."The pressure on market multiples and earnings is likely to continue.

Malaysia Malaysia Latest News, Malaysia Malaysia Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Russian stocks sink 9%, ruble plunges to 14-month low as conflict fears intensifyThe stand-off between Russia and the West over Ukraine sent Russian assets tumbling on Monday. Thank you for the great review that we had the other day. You made it easier for me to understand crypto trade. earn 🙌 R75k$ with the help of MichaelWeldon_ I don't want to sound offensive, I'm just curious, is there someone that really trade/invest in the Russian Market? Talking about retail investors. investing trading DayTrading cryptocurrencies And Nasdaq?
Source: CNBC - 🏆 12. / 72 Read more »

Swoon in Tech Stocks Puts Startup Valuations in Harsh New LightAfter a blowout year, venture investors have taken note of the downturn in publicly-traded tech stocks and are beginning to question prices for late-stage funding rounds.
Source: WSJ - 🏆 98. / 63 Read more »

Hong Kong Stocks Become An Oasis Of Green In A Sea Of Red, Week In ReviewAsian equities had another rough day to end a rough week, though Hong Kong and the Philippines were outliers as both managed small gains. Follow DoraineGenius for the latest updates in the METAVERSE and all of the CRYPTO SPACE. Ethereum bitcoin btc eth SHIB doge cryptonews NFTnews NFT NFTCommunity NFTartists nftcollector NFTGiveaway nftgallery NFTs cryptoart Crypto Metaverse newnftproject
Source: Forbes - 🏆 394. / 53 Read more »

Stocks close out worst week since March 2020Stocks fell again on Wall Street Friday, capping off the worst weekly drop for the S&P 500 since the start of the pandemic Let's go Brandon
Source: latimes - 🏆 11. / 82 Read more »

These stocks reporting earnings in the week ahead typically beat the Street and riseHere are the top historical performers for a busy week of earnings. Cool Bitcoin go!!!!🌻🌻🌻 Maybe stocks will soon skyrocket again….. cenntro $CENN NFA!
Source: CNBC - 🏆 12. / 72 Read more »

Hong Kong Stocks Become An Oasis Of Green In A Sea Of Red, Week In ReviewAsian equities had another rough day to end a rough week, though Hong Kong and the Philippines were outliers as both managed small gains.
Source: Forbes - 🏆 394. / 53 Read more »