Monday, August 22, 2016

DJIA Overvalued by 1,000 points?

Before everyone starts screaming about how financial models aren't meant to be used this way and that my first born should be ashamed of me, let me just say that this is just to provoke conversation.

That said, using finbox.io, I've aggregated the "fair values" of the 30 Dow Jones Industrial Average components and find that the "Fair Value" of the Dow Jones is roughly 17,563 (roughly 1,000 points lower than current close).

To give some background, the "fair values" for each of the components is calculated from the average analyst estimates. Also, these fair values for each component are actually the averages of multiple valuation models including Divided discount models and DCF models with different exit pricing (growth multiples, EBITDA multiple, etc.).

With that said, what are everyone's thoughts? Does this market look ripe for a correction, or are we going to see analysts raise their estimates moving forward? I would also note that I've evaluated the Dow Jones Fair value on two other occasions, May 4th and August 4th, and the fair value for the DJIA has decreased each time.

Image of spreadsheet



Submitted August 22, 2016 at 07:47PM by jpoms13 http://ift.tt/2bcVAEn

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