Where Are Valuations At Heading Into 2016? EM Edition

Yesterday we looked at where developed world valuations stand so today we are going to move over to the emerging markets. The equity pain experienced in the EM in 2015 has been well documented. While the median stock in the developed world has managed to squeak out a slight gain, the median stock in the emerging markets is down a disastrous 15% YTD. It shouldn’t be any surprise then that the average and median valuations in the emerging markets are both well below levels seen in the developed world.

The average price to cash flow valuation for a company in the emerging markets still sits at a fairly lofty 13.19x. However, the median price to cash flow valuation is much lower at 8.24x. EM Asia has the highest valuations as 12 of the 15 most expensive EM countries based on average price to cash flow valuations come from this region. On the end of the spectrum, EM EMEA has the lowest valuations. It seems almost impossible, but somehow the median Greek equity is trading at just 0.3x cash flow!

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Price to earnings ratios are all over the board in the emerging markets. On the high end you have Egyptian stocks trading at 50x earnings while on the low end most countries are trading in the low teens. The median price to earnings ratio in the emerging markets is 15.25x. 12 countries are currently trading at price to earnings ratios below this level.

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When we look at price to book valuations we again see some more startling valuation levels out of Greece. The average price to book value ratio in Greece is just 0.37x. However, this looks high when we see a median price to book value of just 0.03x! Indonesia is currently trading at the highest average and median price to book valuations. Overall, the average price to book value ratio is 2.73x and the median price to book value ratio is 1.58x.

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The average price to sales ratio in the emerging markets is 3.4x and the median price to sales ratio is 1.72x. China is currently trading below the overall average and mean price to sales ratio. The average price to sales ratio in China is 2.35x and the median price to sales ratio is 1.25x. Greece once again has valuation levels that seem almost impossible. The average price to sales ratio in Greece is just 0.6x and the median price to sales ratio is just 0.1x.

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