Estimate of EPS for the Aggregate Market

In general it is difficult to estimate the earnings of the aggregate market. Therefore, the sales are estimated first followed by the deduction of other items:

Earnings = Sales * operating profit margin – D – A – I – T

To estimate Sales:

% Change of Sales of S&P500= -3.1% + 1.2* % change of GDP

To estimate operating profit margin:

Estimate EBITDA (Capital utilization, unit labor cost (wages and productivity), Inflation and Foreign Competition)

To estimate the depreciation and amortization:

Based on the capital investment levels

To estimate the interest

Based on interest rate and debt outstanding

To estimate tax:

Based on possible political changes