      aswathdamodaran.blogspot.com · 2020-02-26
      · 2290d
    

A Viral Market Meltdown: Fear or Fundamentals?

The article applies a fundamentals-based valuation framework to assess the COVID-19 market crisis of February 2020, modeling the impact on earnings growth, cash returns, and equity risk premiums rather than relying on sentiment. The author concludes the S&P 500 fair value is approximately 3003 (4.14% below the close), warranting neither panic selling nor aggressive buying, while encouraging readers to construct their own valuations using provided spreadsheets.

6 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

2008 Financial Crisis Earnings Decline

40percent

S&P 500 earnings drop from 2007 to 2008

Average Corporate Cash Returns

85.24percent of earnings

average

Last decade historical average

Buyback Portion of Cash Returns

60percent

Approximate share of total cash returns in 2019

COVID-19 Mortality Rate

3percent

overall

Global average for infected population as of February 2020

Corporate Cash Returns to Shareholders

92.33percent of earnings

US companies in 2019

S&P 500 Equity Risk Premium

5.50percent

February 25, 2020 (higher end of historical norms)