Oops, they did it again — stocks flirt with lofty levels not seen in 15 years

The recent selloff notwithstanding, stocks are pricey.

Indeed, the last time the average S&P 500 stock was this expensive, Britney Spears was the hottest name in pop music and the market was on its doomed path toward the meltdown that came to be known as the dot.com bust.

Valuation—a measure of how much stocks are worth using many different metrics including earnings—is near levels seen during the tech-bubble era, according to Savita Subramanian, an equity and quantitative strategist at Bank of America Merrill Lynch.

 “The S&P 500 median P/E [price-to-earnings ratio] is currently at its highest levels since 2001 and suggests that the average stock trades a full multiple point higher than the oft-quoted aggregate P/E. This puts it in the 91st percentile of its own history and just 14% from its tech-bubble peak,” Subramanian said in a report.

Some analysts believe that the median P/E ratio, the number representing the midpoint of the range, is a more reliable measure of valuation than the standard P/E ratio that is most commonly referenced.

On aggregate basis, the forward P/E ratio hit 16.7 times multiple in September, which is 10% above its historical average. By Subramanian’s reckoning, the market is stretched on most metrics, save for two exceptions: normalized P/E and a ratio based on price to free cash flow.

The one key difference, however, between this market and its younger, vulnerable self from 15 years ago is that valuations of the so-called mega caps—the companies with the largest value like Apple Inc.—is nowhere near the 2001 apex.

“The group keeping the S&P 500 aggregate forward P/E 30% below its tech-bubble levels is the mega caps, which are trading well below their valuations at that time,” said the strategist.

The 20 largest stocks in 2001 were trading at a median P/E of 25 times compared with 17 times now. Apple AAPL, +1.18% the largest company by market cap in 2016, is trading at 13 times versus over 25 times for General Electric Co. GE, -0.02% which was the largest company by market cap in 2001, she said.

Ultimately, even with elevated valuations, stocks are more attractive than bonds for now, given that dividend yields are near 60-year high versus the 10-year Treasury yield. The 10-year Treasury note TMUBMUSD10Y, +1.15%  was under pressure Wednesday, with yields climbing to a four-month high.

Coincidentally, Spears has been making a comeback.