What would you say if you were told about a company whose stock was trading much lower to expected earnings per share than the S&P 500 Index? At the same time, it’s also expected to increase EPS nearly three times as quickly as the benchmark index through 2023.
That’s high, but it has fallen. Here’s a chart that shows the movement of the S&P 500’s forward P/E along with those of the Invesco KBW Bank ETF KBWB, +0.09% and the Invesco KBW Regional Banking ETF KBWR, -0.70% : The larger banks as a group tend to trade at about 70% of the S&P 500’s forward P/E valuation. Even though KBWB has returned 38% over the past year, it is still trading a bit lower, relative to the S&P 500, than usual on this basis.
The Fed will end its extraordinary bond purchases in March, which will put further upward pressure on long-term interest rates. The central bank is also expected to increase short-term rates several times this year.
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