European Stock Market Currently Trades at EV/EBITDA of 6.4

European Stock Market Currently Trades at EV/EBITDA of 6.4

Cyprus announced a bailout plan over the weekend and the response has been lukewarm to say the least. Futures are down significantly and while there is no data about Cyprus specifically we assume that the country and Greece (considering the close ties) are taking the biggest beating. European markets open in about eight hours.We thought it would be a good time to look at market valuations in European stock market. We are looking at countries and sectors in this article not specific names (we have one idea here subscription required). Although many people are now cottailing me (only half kidding) and looking at the PIIGs. The data comes from Morgan Stanley Europe and was published on March 15th 2013. If futures are correct market valuations should be far lower by tomorrow morning.

European market valuation European-market-valuation


Carlson’s Double Black Diamond Ends 2021 On A High

Black DiamondIn December, a strong performance helped Carlson Capital's Double Black Diamond fund achieve a double-digit return in 2021. Q4 2021 hedge fund letters, conferences and more Double-Digit Return According to a copy of the latest investor update, which ValueWalk has been able to review, Clint Carlson's Double Black Diamond fund returned 2.9% in December and Read More

I think PE is bad metric considering abnormally low depressed earnings but you can see for the various countries and 2013 E earnings 12.6 PE. The latest CAPE numbers for individual European countries can be found here. Dividend yield for Europe is 3.7%, European price over book is 1.55, Price over sales is 0.85%. These numbers seem pretty low.

However, the market valuation metric which makes Europe look the most cheap is EV/EBITDA. EV/EBITDA is 6.4 for Europe, 4.3 for Australia, Germany 5.4, France 6, Italy 4, etc. These numbers are very low (Norway is anomaly due to many large oil companies accounting for a high percentage of the market cap there) and as we showed in an earlier article EV/EBITDA has been shown by some studies to be the best valuation metric.

Unfortunately there are no numbers on Cyprus, but its interesting to note how cheap some of the ‘stronger’ European countries have become.  Nearly every country here is cheaper than the S&P 500 using any valuation metric.

Market valuation of every major country

Readers can also see that the European stock market is cheaper than almost every major world market. I am not trying to pitch equities here of certain countries (I am not an RIA etc. you can see legal disclaimer). It just seems that Europe still has many bargains.

I have thought for a while that the crisis in Europe is far from over (before the world woke up after the Italian elections). However, my market timing skills are awful so its good I do not rely on them. Few expected the Greek market to be up over 100% even though again there is further pain ahead. So value investors can see this as a basis for where they might want to search for bargains or buy some country ETFs. However, there is always the risk that Mila Kunis indeed called the bottom this past Friday morning.

Some sectors also are very cheap on a quantitative basis. Autos and energy both trade below an EV/EBITDA of 4. Chart below with all the numbers.

European sectors and industry valuation metrics data

European stock performance relative to America's

Finally, look how the US has been outperforming European equities in these two charts.  Again, I have thought for a while that America has the strongest economy in the world, but as many know economic strength does not equal market returns.

Disclosure: I own some ETFs of countries above as well as individual equities in many European countries, which will probably get killed on Monday and probably next few days, possibly next few weeks/months/years.

Updated on

No posts to display