European Equities’ Forward Valuations Just Shy Of Average

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A Strategy Data Gallery on European equities presented by Morgan Stanley (NYSE:MS)’s European Equity Strategy Team comprised of Graham Secker, Ronan Carr, Matthew Garman, Krupa Patel and Hanyi Lim shows that stocks in Europe are still valuing just shy of their historical averages.

European equities: Next 12 months Price to Earnings


European Equities: Next 12 months Dividend Yield

2-fwd-divyield European Equities 

European Equities: Long term Price to Earnings as per Shiller CAPE

3-shiller-cape European Equities 

Note that the MSCI Europe Shiller ratio, at 13.5, is still ruling below its long-term average, while in the case of the S&P 500 (INDEXSP:.INX), at 24.7, it has crossed above the historical average.

4-shiller-cape-sp500 European Equities

Given that valuations still appear to have headroom in Europe, it might be useful to look at country data for more specific investment opportunities.

5-table European Equities 

Country valuations – P/E basis

On a price/earnings basis, as estimated for 2014, Austria is the cheapest at 10.5 while Greece is most expensive at 32.3. The MSCI index is estimated at 12.9.

iShares MSCI Austria Investable Mkt (ETF) (NYSEARCA:EWO) is an ETF that offers investors a route to investing in Austria. The ETF tracks the MSCI Austria Investable Market Index and is trading at $19.18. It has an expense ratio of 0.52%. It has returned 6.89% year to date and 10.04% over 1 year.

Austria had a CAPE ratio value of 8.21 as on March 31, 2013.

Country valuations – P/BV basis

According to the price/book value metric for 2014, Italy is very cheap at 0.82 whereas Denmark is a high 2.33 and MSCI is 1.56.

Investors desiring an exposure to Italian equities may consider the iShares MSCI Italy Index (ETF) (NYSEARCA:EWI).

The ETF tracks the MSCI Italy Index and is trading at $14.74. It has an expense ratio of 0.51%. It has generated returns of 11.51% YTD and 14.95% over 1 year.

Italy had a CAPE ratio value of 6.88 as on March 31, 2013.

Country valuations – Dividend yield basis

While the MSCI dividend yield is estimated at 3.8 for 2014, Norway offers a steep dividend yield of 5.2 compared to a low 1.5 estimated for Greece.

Global X Funds (NYSEARCA:NORW) is an ETF that tracks the FTSE Norway 30 Index and which has an expense ratio of 0.50%. It is currently trading at $16.24 and has given investors a return of 6.62% YTD and 9.07% over 12 months.

Norway had a CAPE ratio value of 12.69 as on March 31, 2013.

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