Multiples Are Too Low, Plain and Simple

The earnings strike back! Or is the glass finally half full? When I look at what JPMorgan (JPM - commentary - Cramer's Take) reported and considering what I thought it would report about four months ago, I am amazed at how much I love it now when I would have hated it then.

Those expectations had been lowered so much that even a gloomy statement like the one Jamie Dimon put out -- it is not getting better out there -- isn't bad.

But last night's VF Corp. (VFC - commentary - Cramer's Take) and CSX (CSX - commentary - Cramer's Take) and today's United Technologies (UTX - commentary - Cramer's Take) tell me that we have gotten far too negative about the world too quickly. I am not saying that things aren't slowing. All of those companies see some areas that are slowing.

I am saying that the world's not ending, and therefore earnings multiples should not go to 10 or 11. Yesterday, going in to VF's quarter, the company was selling at 11 times earnings. Same with United Tech. You have to really do badly to deserve that multiple. Admittedly, CSX's multiple on next year's earnings was 17 going into the quarter, and that's high, but the growth there is 17% and moving up, so it is not unusual. Same with Danaher (DHR - commentary - Cramer's Take) for growth, too.

Think about the multiples here. They are what matters at this crunch moment. Don't get too caught up in the gloom that you think that everything deserves a single multiple. It is like what I wrote yesterday morning about how there is cash everywhere but in the banks, and they can't be valued as poorly as they are. I would say the same thing by the way with Conoco (COP - commentary - Cramer's Take) and Exxon (XOM - commentary - Cramer's Take). It is inconceivable to me that COP deserves a 6 multiple on next year's earnings as it is getting now, same with Chevron (CVX - commentary - Cramer's Take). Exxon at 8 times earnings? Come on. You have to have oil going to $100 in three months to make that happen, and I just don't see that. I can see $120. I can even see $110 if inventories really balloon and Iran says it will be more like North Korea and less like the Taliban.

But those are big assumptions.

The multiples are simply too low for too much of the market. That's the view you need to adopt into the selloffs for all but the banks and brokers. They, after yesterday, might be too expensive!

Random musings: Ameritrade (AMTD - commentary - Cramer's Take) joins Schwab (SCHW - commentary - Cramer's Take) with great numbers. No one is talking about this, but it is hard to reconcile in a huge bear market. ... We don't need more housing starts, we need fewer. At this plus-million level, we are going to push out the recovery even further.

At the time of publication, Cramer had no positions in the stocks mentioned.

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