Strong corporate profit margins may make the S&P 500 better value than traditional P/E ratios suggest, despite elevated stock prices. Per Bloomberg, its P/E-to-profitability ratio is at its lowest in nearly 14 years, last seen around 2012. Wall Street might be overlooking something important. x.com 

S&P 500 earnings are keeping pace with prices, so this does not look like a bubble. Quarterly earnings are on track to grow 29.5%, more than twice the 10-year average of 12.6%, while the 18.7 forward P/E is just below its 19.1 decade average. x.com 

Phillips 66 looks expensive against its earnings at 15x trailing and 10x next year's, while oil and gas producers usually get 9x. Applying 9x to mid-cycle EPS of $15.31, give or take 12%, puts fair value at $120.49 to $153.35, so $264.58 is 73% above the top of that range. Trailing and forward earnings differ by 50%, so the range is wide, and this is a valuation read only, not fundamental work. x.com 

The S&P 500's elevated P/E masks concentration in just a few stocks, making index exposure less appealing than selective stock picking for risk and reward. Its P/E is well above the ten-year median; digging into individual constituents looks more sensible than buying all 500. x.com 

The S&P 500's top 30 stocks cost three times as much per dollar of free cash flow as the other 470, despite their stronger margins. Their net margins are 34% versus 17%, but they trade at 5.6x sales and a 1% free-cash-flow yield excluding stock compensation, against 2.3x and 3% for the rest. Half of an index-fund investment rides on those 30 stocks at the richest multiples in modern history. x.com 

Marathon Petroleum looks expensive against its earnings. It trades at 15x trailing earnings when oil and gas producers usually get 10x, putting fair value at $239.59-$304.93 on 10x mid-cycle EPS of $28.21, give or take 12%. Trailing and forward earnings differ by 69%, and $259.65 marks a pullback level. This is a levels-only read off reported earnings and estimates, with no fundamental work. x.com 

EQT, Range Resources, Expand Energy, Magnolia Oil & Gas and EOG Resources are cyclicals catching an earnings tailwind before the crowd notices, the setup Peter Lynch loved. They passed a screen alongside Coterra, all natural gas or oil producers with disciplined balance sheets and forward P/Es of 9-12. x.com 

Diamondback Energy looks cheap against its sales at $189.27. Fair value is $197.99 to $251.99, about 5x mid-cycle sales give or take 12%, and it only becomes expensive above $313.49; trailing and forward reads differ by 40%, widening the range. The view rests on valuation levels from reported earnings and revenue estimates, not fundamental work. x.com 

Valero looks expensive against its earnings, trading at 17x, or 10x next year's, versus the usual 9x for oil and gas producers. At 9x mid-cycle EPS of $22.12, give or take 12%, fair value is $177.34-$225.71, so the $406.30 price is 80% above fair, though trailing and forward reads differ by 63%. This is a valuation read off reported earnings and estimates only, with no fundamental work. x.com 

Marathon Petroleum's earnings are impressive at $17 a share, and Q3 should be better. The open question is whether it can reach $25 a share and sustain that for a few quarters. x.com