The ASX 200 closed on Friday priced at 4,063 which is a 12% fall from 1 year ago. At this price I have earnings (which are 12-month trailing underlying profits) at 337 which results in a price earnings ratio (P/E Ratio) of 12.1. In comparison I have calculated the S&P 500 P/E Ratio at 14.3 and the FTSE 100 P/E Ratio at 9.4 this month.
The history of the ASX 200 P/E Ratio since 1993 can be seen in my first chart today along with the Ratio I am personally far more interested in which is the ASX 200 PE10 (effectively an ASX 200 cyclically adjusted PE or ASX 200 CAPE for short). The method is based on that made famous by Professor Robert Shiller and in this instance it is simply the ratio of Inflation Adjusted Monthly ASX 200 Monthly Prices to Inflation Adjusted Average Earnings. Today the ASX 200 PE10 sits at 13.9. A full summary of relevant ASX 200 PE10 data follows:
- ASX 200 PE10 = 13.9
- Dataset Average PE10 = 22.1. If this average was “fair value” then it indicates that today the ASX200 is 37% undervalued. I’m not convinced of this though and think it is a result of a relatively short dataset but I’ll talk more of that later in this post.
- Dataset Median PE10 = also at 22.1
- Dataset 20th Percentile = 16.9
- Dataset 80th Percentile = 27.5