Below are the valuation targets for the Dow Jones Transportation Average for the next 10 years.
Our valuation targets for Dow Jones Transportation Average in 2018 are:
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14,254.48 (overvalued)
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11,620.50 (fair value)
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8,986.52 (undervalued)
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6,042.66 (extreme undervalue)
The valuation targets for Dow Jones Transportation Average are based on a dividend growth rate of 7.00% which is derived from the lowest average annual growth rate from Barron’s over the last 38 years and applied to Edson Gould’s Altimeter. A graphical representation of the overvalued, fair value, and undervalued levels are below.
The above Altimeter translates into the following undervalued and overvalued ranges since 2000:
10-Year Targets
| Year | Undervalued | Fair Value | Overvalued | Extreme Undervalue |
| 2018 | 8,986.52 | 11,620.50 | 14,254.48 | 6,042.66 |
| 2019 | 9,615.58 | 12,433.94 | 15,252.29 | 6,465.65 |
| 2020 | 10,288.67 | 13,304.31 | 16,319.95 | 6,918.24 |
| 2021 | 11,008.87 | 14,235.61 | 17,462.35 | 7,402.52 |
| 2022 | 11,779.49 | 15,232.11 | 18,684.72 | 7,920.69 |
| 2023 | 12,604.06 | 16,298.35 | 19,992.65 | 8,475.14 |
| 2024 | 13,486.34 | 17,439.24 | 21,392.13 | 9,068.40 |
| 2025 | 14,430.39 | 18,659.98 | 22,889.58 | 9,703.19 |
| 2026 | 15,440.51 | 19,966.18 | 24,491.85 | 10,382.41 |
| 2027 | 16,521.35 | 21,363.82 | 26,206.28 | 11,109.18 |
| 2028 | 17,677.85 | 22,859.28 | 28,040.72 | 11,886.83 |
| 2029 | 18,915.29 | 24,459.43 | 30,003.57 | 12,718.90 |
| 2030 | 20,239.36 | 26,171.59 | 32,103.82 | 13,609.23 |
| 2031 | 21,656.12 | 28,003.60 | 34,351.09 | 14,561.87 |
Observations
We have a range from as low as 6,465.65 to as high as 19,992.65 in period from 2019 to 2023. The Dow Jones Transportation Average is currently undervalued. It is best to expect that it will decline to the extreme level of 6,465.65.
Last updated: December 23, 2018