It has become commonly accepted that stocks are very expensive, overbought and perhaps even in a bubble.

JPMorgan Chase & Co.'s latest quarterly chart book (you can download it here) takes issue with those conventions.

Source: JP Morgan Chase & Co.
Source: JP Morgan Chase & Co.

As you can see from the chart above, U.S. equity prices closely match their long-term average price-to-earnings ratio of 15.5. That’s precisely at fair value if you are comparing it to the Standard & Poor's 500 Index earnings-per-share average of analyst estimates for the next 12 months.

That is one of the most common ways to value companies, but there are plenty of other approaches that show stocks either over or undervalued.

On the one hand, forward earnings yield -- the inverse of forward P/E as compared to Moody’s Baa bond yield -- show stocks as being inexpensive. The counterargument is that this is occurring because the Federal Open Market Committee pushed rates so low that it gives equities an artificial cheapness. Whether that explanation is fair, stocks are more attractively priced than bonds using this valuation method.

Shiller's cyclically adjusted P/E ratio, or CAPE, which measures the average inflation-adjusted earnings during the past 10 years, is at the other end of the scale. At 25.6, its valuation is very high. However, since 1990 the metric has only been below its historical average 2 percent of the time. If you avoided equities while they were above their historical CAPE measurement, you just missed 24 years of equity gains. So, stocks appear to be very expensive if you choose to use this valuation method.

Everything in between is, well, in between. Dividend yield is 1.9 percent, down from 2 percent last year, which matches its 10-year average. The P/E-to-growth ratio -- PEG -- is below its 10-year average but above its 25-year average. The price-to-book ratio is below its 25-year average but above its one-year average. Price to cash flow at 11 is a little higher than its 25-year average of 10.6.

Stocks may be cheap, expensive or fairly valued. Your take on how expensive or cheap stocks are is a Rorschach test -- it reveals as much about the observer as it does about equity valuations.

To contact the author of this article: Barry Ritholtz at britholtz3@bloomberg.net.

To contact the editor responsible for this article: Alex Bruns at abruns@bloomberg.net.