15 Stocks With Nose-Bleed P/Es

Zacks Investment Research
updated | Zacks.com

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 (NASDAQ:AMZN) trading with a P/E of 67 and Wynn Resorts (NASDAQ: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 (NASDAQ:NFLX) at 61 and Baidu.com (NASDAQ: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

CompanyTickerForward P/E Ratio
Ctrip.comCTRP51
Las Vegas SandsLVS52.5
CDI Corp.CDI54.2
Orbitz WorldwideOWW55.2
NetflixNFLX61
Robert Half Int’lRHI63.9
Intrepid PotashIPI66.7
Amazon.comAMZN67
Wynn ResortsWYNN68
Baidu.comBIDU76
Red HatRHT76
Hyatt HotelsH134.6
The KnotKNOT137.3
OpentableOPEN153.7
Salesforce.comCRM177

 

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.

 

 

 

 

 

 

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