Even though earnings have been beating estimates, sales per share for the market is still falling from a year ago.
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Expectations coming into earning season were very low. Most of the upside is coming from cost cutting, not from revenue surprises. This is why the market is acting manic. At some point, however, sales for the market must begin rising as there is only so much cost cutting corporations can do.
The most recent sales per share for the S&P 500 from Bloomberg is $955. Applying a 7% net profit margin to that number gets us normalized earnings of just under $67. The market is trading at 14.3x "normalized" earnings. The historical long-term profit margin for the market has averaged 6%. If we use this as our normalized margin, earnings would be just over $57, and the market would be trading at 16.6x. Neither is cheap given the current environment.