The NASDAQ Composite index traded at 24.6x its earnings per share on the last day of February 2015. The NASDAQ Composite index traded at near 200x its earnings per share when valuations peaked before the dot com bubble burst in the year 2000. Valuations in the current scenario do not suggest a bubble in the making as fundamentals are strong and improving further at a rapid pace for technologically innovative companies.
The NASDAQ index has given highest return of 16.75% on a year on year basis and 5.09% on a year to date basis compared to the indices of Dow Jones Industrial Average and S&P 500 which have given 13.7% and 15.5% on a year on year basis and 2.22% and 2.58% on a year to date basis respectively. While the NASDAQ has yet to match the other major indices this year when it comes to record-setting finishes, the index is easily outpacing them in terms of percentage gains. The difference is because of the tech heavy nature of the composition of stocks that have outpaced earnings growth of the traditional manufacturing and energy company stocks.
The US has three main stock market indices, Dow Jones Industrial Average, Standard and Poor’s 500 referred to as the S&P 500 index and the NASDAQ (National Association of Securities Dealers Automated Quotation System). The Dow Jones Industrial Average and the S&P 500 Index have reached an all-time record high levels of 18,244.38 and 2119.59 respectively in the month of February 2015 on account of corporate earnings growth fuelling the rally. The NASDAQ index is within a very short striking distance of all time record high levels of 5132.52 in the month of February 2015. The index had recorded highest levels in the month of March 2000 (during the dot com bubble) when internet and technology stocks rallied to unimaginable valuations. It would be interesting to note which stocks have driven the valuations near to record high levels for the NASDAQ index in the month of February 2015 and what lies in the road ahead for them.
NASDAQ stands for National Association of Securities Dealers Automated Quotation System. The NASDAQ-100 Index is a modified market capitalization weighted index and was launched in 1971 with a starting value of 100. The security types eligible for the Index include common stocks, ordinary shares, and ADRs. To be eligible for initial inclusion in the Index a security must have an average daily trading volume of at least 200,000 shares and be listed exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market for at least three full months excluding the first month of initial listing.
The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
Technology comprises 57.18% followed by Consumer Services at 21.27%, Healthcare at 12.38%, Consumer Goods at 3.9%, Industrials at 3.77%, Telecommunications at 1.12% and Basic Materials at 0.38% for the composition of the index. Apple Incorporation company has the highest weightage of 10.97% in the NASDAQ index followed by Microsoft with a weightage of 8.51%, Google with 7.04%, Oracle with 4.26%, Cisco Systems at 3.83% and Amazon at 3.73% while others have less than 3.56% weightage each in the index.
Strong performances from tech giants such as Apple and Amazon are driving the gains for the index. Apple stock rose 74.11% on a year on year basis, 16.32% since the beginning of the year 2015 and it has become the first U.S. company to cross USD 700 billion in market capitalization. Amazon stock rose 22.47% while impressive gains of 20.66% from biotech outfit Biogen Idec and 9.83% from Gilead Sciences since the beginning of the year 2015 have also contributed to the Nasdaq’s strong performance.
Apple Inc. announced financial results for its fiscal 2015 first quarter ended December 27, 2014. The Company posted record quarterly revenue of USD74.6 billion and record quarterly net profit of USD18 billion, or USD3.06 per diluted share. These results compare to revenue of USD57.6 billion and net profit of USD13.1 billion, or USD2.07 per diluted share, in the year-ago quarter. International sales accounted for 65 % of the quarter’s revenue. The results were fuelled by all-time record revenue from iPhone and Mac sales as well as record performance of the App Store. iPhone unit sales of 74.5 million also set a new record. EPS grew 48 % over last year and the company reported USD33.7 billion in operating cash flow during the quarter, an all-time record.
The company has no long term debt at the end of first quarter of FY2015 and has a current market capitalization of USD 748 billion with a price of USD 128.46 per share with a P/E Ratio of 17.31. The Price to Book Value is 6.06 and the Market Capitalization to Sales ratio is 2.5 (FY15 est.). Apple Inc. had reported a P/E Ratio of 30 during the peak period before the dot com bubble burst in the year 2000.
For Amazon Inc. the net sales increased 20% to USD88.99 billion for the year ended 2014, compared with USD74.45 billion in 2013. Excluding the USD636 million unfavourable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 20% compared with 2013.Operating income was USD178 million, compared with operating income of USD745 million in 2013.
The company had a long term debt to equity ratio of 0.7695 for the year ended 2014 and has a current market capitalization of USD 176 billion with a price of USD 380.16 per share. The Price to Book Value is 16.45 and the Market Capitalization to Sales ratio is 1.97 (FY14).
For Biogen Idec full year revenues were reported at USD 9.7 billion, a 40% increase versus 2013. Full year 2014 Non-GAAP diluted earnings per share (EPS) was reported at USD 13.83, an increase of 54% versus 2013. Non-GAAP net income attributable to the company for the year was USD 3.3 billion, an increase of 54% versus the year prior. On a reported basis, GAAP diluted EPS for 2014 was at USD 12.37, an increase of 58% versus 2013. GAAP net income attributable to the company for 2014 was USD 2.9 billion, an increase of 58% versus 2013.
The company had a debt to equity ratio of 0.0541 for the year ended 2014 and has a current market capitalization of USD 96 billion with a price of USD 409.59 per share with a P/E Ratio of 33.55. The Price to Book Value is 8.88 and the Market Capitalization to Sales ratio is 9.89 (FY14). Biogen Idec had reported a P/E Ratio of 35 during the peak period before the dot com bubble burst in the year 2000.
For Gilead Sciences full year 2014 total revenues were reported at USD 24.9 billion an increase of 122.32% compared to USD 11.2 billion for 2013. Net income for 2014 was reported at USD 12.1 billion, or USD 7.35 per diluted share, an increase of 290.32% compared to USD 3.1 billion, or USD 1.81 per diluted share for 2013. Non-GAAP net income for 2014, which excludes amounts related to acquisition, restructuring, stock-based compensation and other, was reported at USD 13.3 billion, or USD 8.09 per diluted share, an increase of 64.44% compared to USD 3.5 billion, or USD 2.04 per diluted share for 2013.
The company had a debt to equity ratio of 0.8 for the year ended 2014 and has a current market capitalization of USD 154 billion with a price of USD 103.53 per share with a P/E Ratio of 14. The Price to Book Value is 10.06 and the Market Capitalization to Sales ratio is 6.18 (FY14). Gilead Sciences had reported a P/E Ratio of 250 during the peak period before the dot com bubble burst in the year 2000.