SPY - Embedded Expectations Analysis - 2018 04 19
The SPY currently trades at levels in line with pre-recession valuations relative to UAFRS-based (Uniform) Earnings, with a 20.1x Uniform P/E (Fwd V/E′). At these valuations, market expectations are for sustained profitability in line with recent trends, suggesting reasons to believe the fund is likely fairly valued at worst, with the potential for upside should growth improve going forwardS&P 500 companies have seen Uniform ROA (ROA') plateau around 13% levels since 2010. While profitability has been robust, it has come at the expense of Uniform Asset growth, which has remained relatively muted at or below 5% levels since 2010. As such, market expectations for Uniform ROA to remain at current 13%-14% levels, coupled with Uniform Asset growth of 3% going forward, appear realistic at worst, and potentially pessimistic around growth
Valens' Market Phase Cycle analysis highlights reasons to think that current valuations are not too aggressive, and growth will accelerate. Corporate management teams are growing more confident about investing in growth, implying Asset' growth should likely accelerate. Also, there are no significant credit headwalls or risks for a credit freeze that could negatively impact corporate profitability sustainability, and declining corporate tax rates should boost earnings
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.