When evaluating stock prices, it is helpful to know some historical benchmarks.
For the S&P 500, the index of the 500 largest companies trading in the U.S., the average Price Earning ratio (P/E) since 1936 is 16 for TTM (Trailing Twelve Months, or the past year) earnings. Standard and Poors offers a spreadsheet of quarterly historical P/E ratios.
The Price To Book (P/B) ratio over the past 40 years averaged 2.4. The Return On Equity (ROE) averages 12% but the past 15 years have seen an ROE closer to 16%.
In an FT column 9/23/09, the book value of the S&P 500 was calculated at $451. If the S&P 500 were to trade at historical averages of price to book, it would be 867. The index closed at 1044 this past Friday.