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Global Stock Market Valuation Heat Maps: A Look at Cheapest and Most Expensive Markets

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Japan and developed Europe appear to be the cheapest markets with Asia and the big commodity players being the most expensive. The US? Right about in the middle.

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Editor's Note: For more from Prieur du Plessis, visit Investment Postcards.

Based on data provided by Aswath Damodaran, professor of Finance at NYU, Seeking Delta has created a series of global stock market valuation heat maps. As shown below, this is a very useful way of illustrating various stock market valuations and I am grateful to Seking Delta for granting permission to publish the research.

The data are as of January 2011 and include all publicly traded US firms and all those with a market cap greater than $5 million for non-US firms. Value Line is the source for US data and a combination of Bloomberg and Capital IQ for non-US data.

Countries where data were available for 30 or more firms were ranked by equally weighting Price/Earnings, Price/Book, and Price/Sales ratios. More specifically, for those wonkishly inclined, the z-score for each metric was used in order to properly weight the possibility of a similar relative metric rank but a significant absolute difference. The color scale runs from dark green (cheapest) to dark red (most expensive).

According to this valuation method Japan and developed Europe appear to be the cheapest markets (no big surprise), with Asia and the big commodity players (Australia and Canada) being the most expensive. The US comes out in about the middle; 36th out of 71 countries ranked. See map below.

Click here or on the image below for a larger map.



Unfortunately, I was unable to make the chart larger to view detail but an expanded view of each region can be seen below.

Click here or on the image below for a larger map.



Click here or on the image below for a larger map.



Click here or on the image below for a larger map.



Click here or on the image below for a larger map.



Click here or on the image below for a larger map.



Using broad sub-groupings, Japan is the cheapest broad market (not country), with Africa and the Middle East being the most expensive. See table below.

Click here or on the image below for a larger table.



Source: Seeking Delta, January 26, 2011.

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No positions in stocks mentioned.
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