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Are We In A Burrito Bubble?

Stocks are moving up slightly from yesterday’s record close, looking at the S&P 500, and some notable upside earnings surprises have led to leaps in individual share prices. And yet, revenue growth sucks, as the Wall Street Journal reports today. Ask IBM (IBM). Or consult the YCharts Stock Screener.

Particularly worrisome, if you’re holding U.S. stocks, is the fact that earnings estimates for 2014 are very optimistic. If and when those projections are brought back toward the economic reality we exist in today, stocks could reverse recent gains and swiftly.

YCharts’ Dee Gill warned little more than one week ago that fourth-quarter earnings estimates remained awfully rosy, considering the many instances of lowered guidance for the third quarter.

And now we see scattered bubble-icious trading in a handful of stocks that are exceeding expectations, even if only by a bit. Google (GOOG) and Chipotle (CMG) leapt after reporting yesterday.

GOOG Chart

GOOG data by YCharts

Burritos for 52 times earnings and other wonders. That’s significant multiple expansion. Holders of Chipotle might want to lay their hands on some investment research tools.

GOOG PE Ratio TTM Chart

GOOG PE Ratio TTM data by YCharts

Predicting a top, of course, is a foolish endeavor, as higher stock prices tend to attract more buyers (at least individuals) into the market. But the fundamentals at this point are troubling.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

Read more articles about: Investing Ideas  stocks that look pricey   

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