How US Equity Valuations Have Changed From 2008
It is interesting to see just how far multiples have expanded since the financial crisis. Since 2008, price to cash flow multiples are at least 25% higher (food beverage and tobacco actually didn’t make a valuation low until 2010) and is has many as 8x higher in the case of automobile and components. On average, valuation multiples have increased by 135% since 2008. 11 out of the 24 industries have seen multiples expand by at least 100% since 2008 and four industries have seen multiples expand by at least 200%.
Price to Cash Flow Valuations By Year and By Industry Group
Lastly, it is worth remembering that when an entire industry gets below 10x cash flow (5x cash flow for less growth oriented industries like telecom and utilities) it tends to be a screaming buy. In 2008, only four out of the 24 industries never reached 10x cash flow and eventually two of those industries, consumer services and banks, broke below 10x cash flow in 2009.
