15 Stocks With Nose-Bleed P/Es - Analyst Blog

Stocks are hitting new 2-year highs both in the United States and in Europe. As the rally off the March 2009 lows pushes stocks to new levels, some investors are starting to ask: are stocks too expensive now?

Overall, the S&P 500 index doesn't look very expensive. It is trading at about 15x forward estimates. Historically, the index has averaged a trailing P/E of about 15 since 1920. It is, however, well off the low valuations of March 2009.

So, the current S&P 500 is not "cheap" and it's not "expensive." It is within the range of the average valuation for the index.

P/Es Over 50 Make a Comeback

Part of the fear about stocks now being too expensive comes from some prominent companies now trading well above the overall S&P 500 average. Lots of investors follow these companies.

Out of the S&P 500, 12% of companies are now trading at 25x forward estimates or higher. These stocks would be considered "expensive" by historical standards.

Out of the expensive stocks, 18 companies in the S&P 500 are trading with forward P/Es of 50 or higher. This list includes some investor favorites such as Amazon.com (AMZN) trading with a P/E of 67 and Wynn Resorts (WYNN) at 68 times forward estimates.

Looking outside of the S&P 500, you can find some other investor favorites also trading with nose-bleed forward P/Es such as Netflix (NFLX) at 61 and Baidu.com (BIDU), the Chinese Internet search engine, with the sky-high P/E ratio of 76.

Don't Ignore Valuations

There have always been some "expensive" stocks. But two years after the worldwide stock market crash, are nose-bleed level P/Es a sign of some irrational exuberance starting to percolate in equities or that healthy risk has returned?

As this rally picks up speed, investors should be watching P/E ratios for signs of overheating. While overall, stocks aren't expensive right now, the P/E ratio has only been moving one way the last several months: higher. And some individual stocks may simply be too hot to handle.

15 Stocks With Forward P/E Ratios Over 50

Company	Ticker	Forward P/E Ratio
Ctrip.com	CTRP	51
Las Vegas Sands	LVS	52.5
CDI Corp.	CDI	54.2
Orbitz Worldwide	OWW	55.2
Netflix	NFLX	61
Robert Half Int'l	RHI	63.9
Intrepid Potash	IPI	66.7
Amazon.com	AMZN	67
Wynn Resorts	WYNN	68
Baidu.com	BIDU	76
Red Hat	RHT	76
Hyatt Hotels	H	134.6
The Knot	KNOT	137.3
Opentable	OPEN	153.7
Salesforce.com	CRM	177

 

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 

 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
BAIDU INC (BIDU): Free Stock Analysis Report
 
NETFLIX INC (NFLX): Free Stock Analysis Report
 
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
 
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