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Sunday, 5 January 2014

Bubble Chart of the Day: Price to Sales Ratio for S&P 500 (as of 3 Jan-14) - Record Price, Record Sales and Near Record P/S

The P/S ratio for the S&P 500 stock market index is now higher than at any stage since June 2001 (quarterly data) and at 1.64 is rapidly approaching the previous record high of 1.77 from December 2000.

Price/Sales Ratio S&P 500 (Current price to sales ratio is estimated based on current market price and 12 month sales ending September 2013 — the latest reported by S&P).
Source: multpl.com
A high P/S ratio would not be unusual if Sales were temporarily depressed. But what makes the prospects for poor future stock market returns even worse is that Sales for the companies in the S&P 500 index are at an all-time record high.

Trailing twelve month S&P 500 Sales Per Share (as of Sep-13, non-inflation adjusted)
Source: multpl.com
In addition, the S&P 500 index set a new all time high on the last day of 2013 (though it's down slightly since). A potential double disappointment lurks for the index: Declining sales and a more normal P/S ratio.