Equities Chart

Temperature Check for Equity Valuations

21 November 2017
1 min read
Global Equity Valuations: Feeling the Heat

Price/Forward Earnings (Oct 1999–Oct 2017)

Global Equity Valuations: Feeling the Heat

As of October 31, 2017
Past performance and current analyses do not guarantee future results.
Price/earnings ratio based on estimated earnings for the next 12 months. Dashed line represents the average P/E ratio, based on estimated earnings for the next 12 months, form October 31, 1999, through October 31, 2017. EPS growth is earnngs-per-share long-term growth. PEG is price/earnings-to-growth ratio for the next 12 months. PEG percent rank versus history is based on monthly percentiles from November 1, 2007, through October 31, 2017.
US is represented by S&P 500, non-US developed by MSCIEAFE and emerging markets by MSCI Emerging Markets.
Source: FactSet, MSCI, S&P and AllianceBernstein (AB)

Stock markets around the world have rallied this year, and investors are asking whether equities are expensive. Comparing valuations to growth potential helps shed light on the risks and opportunities in equities.

US stocks are relatively expensive compared to non-US developed stocks and emerging-market (EM) equities, based on price/earnings ratios. Comparing P/Es to earnings growth (the PEG ratio) shows that EM equities are particularly attractive versus their own history and developed-world stocks.

Investors can still find opportunities around the world today. But no matter where you choose to invest, the complex valuation landscape warrants a diligent focus on companies with clear sources of revenue gains and solid earnings growth, as well as close scrutiny on potential risks to cash flows.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

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