Financial ratios and analyst expectations are comforting investment tools and particularly helpful when the sailing is smooth in the markets, as it has been in recent years. Those ratios get less reliable at inflection points when a long trend of earnings growth suddenly grinds to a halt or turns negative. Price/earnings ratios and PEG ratios that looked great when earnings were growing seem meaningless when profits start to plunge.
While a lot of earnings for the third quarter have yet to be reported, it seems that such an inflection point may be upon us. Earnings in the third quarter are down 0.6% from the previous year for the 132 companies in the S&P 500 that have reported at the time of this post. Read the rest of this entry »
Posted by Arnbjorn Ingimundarson 
