I always like to have an idea on the general pricing level of the market as a whole. Although one can get the current PE of the JSE ALSI with some effort, I haven't yet found a reliable source where one can view the history of the PE for comparison (here I'm referring to free web sources, not the myriad of data providers who have this as part of their subscription packages).
Therefore I have decided to compile my own PE & ALSI charts using data exported from one of the databases I subscribe to.
The long term average (since January 1995) PE of the ALSI is 14.4. I also calculated an upper and lower threshold at 25% above and 25% below the long term average PE. Whenever the PE ratio goes below the lower (-25%) threshold, that is when I get excited from a long term timing and buying opportunity perspective.
Think there is a mistake... ALSI is in Blue not red and ALSI PE is in red not blue.
ReplyDeleteThanks for the info though. I don't think it means too much as most of the blue chip resource companies (BIL, SOL, IMP...) are all trading at really low PE ratios (about 8 or 9) because of expected slowdown. In other words their earnings will go down not their prices up (much) and PE's will return to normal
Sharp eye, thanks Nic, now corrected.
ReplyDeleteWorthy comment on the major constituents trading at low PE ratios. Especially the RESI10 is trading at historically low levels. Good primer for investigating where some of these companies' earnings are relative to their long term trend (which can be used as crude proxy for normalised earnings). Think I'll get working on that...
Thanks, very useful chart. Please keep it updated! I will cross post to other forums
ReplyDeleteAny chance of an update to present date
ReplyDelete