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European Shiller PE Below 13 (ERO)

Every month we calculate the US equity markets valuation. We now receive a slew of terrific data on European market valuations, which  is updated every month. Last month’s data can be found here.

These charts ignores all the noise made by important European officials such as the Estonian cultural minister ; almost (basically all) the quantitve indicators indicate a very cheap European market. The numbers in the chart directly below are based on Morgan Stanley numbers for MSCI/Europe, and my own calculations. There are also charts on individual European countries; countries like France, Germany, and Norway seem to be super cheap. Overall it seems the market valuations are far cheaper in Europe than the US. We attached the most interesting of the charts concerning valuation. Click TWICE on each chart to enlarge.

The first first two charts are the most important. Many “healthy” European countries are trading at extremely low valuations likely due to undiscriminating selling from traders. The chart shows that the Eurozone minus the UK is trading at an EV/EBITDA multiple of 5.8, and the PE is only 11.2.

The other chart shows the discount level of European stocks compared to the USA. One thing to keep in mind is that most European countries use International Financial Reporting Standards (IFRS), while  America uses Generally Accepted Accounting Principles (GAAP). Therefore the comparission is not completely Apples to Apples.