Dow 20,000: Is the Market Overvalued?

As the Dow approaches the 20,000 level for the first time, does the market look overvalued? Morningstar's Market Fair Value says stocks aren't exactly cheap today, but they aren't terribly expensive either. 

The Market Fair Value shows the median price to fair value ratio of all of the individual stocks we cover. In essence it shows how big of a gap, on average, we see between market prices and our estimate of intrinsic value across the entire market or a specific sector. 

As of today, the ratio of all rated stocks is 1.02. That compares to a 52-week high of 1.04 seen back in early September and a 52-week low of 0.86 reached in February. 

Looking at just the 30 Dow constituents, the median price to fair value is only a hair higher at 1.03, but that number hides a big spread between the priciest and cheapest members. The most overvalued firm is Caterpillar, trading at a 42% premium to its fair value, followed by Chevron and UnitedHealth, both trading at 23% premiums. 

On the flip side, there are some bargains in the index today. Wide-moat Visa is available at a 25% discount, Disney's price-to fair value ratio is 0.78 while Apple is  trading 15% below our fair value estimate.