Are Earnings Normalizing? At What Level?

Looking at numerous earnings charts, we can come to several conclusions:  

First, the charts imply that the worst of the crisis and recession driven earnings collapse is over.  Second, it appears that earnings are normalizing, i.e., returning to their prior range. Third, that stocks can no longer be described as cheap. Lastly, whether stocks are at fair value or are expensive will be determined by how much equity prices gain relative to ongoing improvements in earnings.

click for larger graphs, below


How Cheap are Stocks ? (1871-2011)


The Chart Store


Inflation Adjusted S&P Earnings Show Normalization


via Chart of the Day


Average Trailing P/E Ratio (1871-2011)


The Chart Store

Originally published at The Big Picture and reproduced here with the author’s permission.
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