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Quick Bite | ASX valuation looks OK

August 22nd, 2023 | Article
By: Paul Zwi

The following charts are sourced from Martin Crabb of Shaw & Partners, who publishes an excellent monthly chart pack.

The first chart below shows Martin’s “fair value” of the S&P ASX 100 (the black line), the index (orange line), and where the market is deemed attractive (i.e. offering a Total Shareholder Return or TSR of 15%, the grey line). As seen in the chart, the index is trading at present between fair value and attractive, offering a TSR of 8.5% (made up of 3.9% dividend yield + 4.6% capital gain). This is a valuation model, and these figures should be regarded as indicative only, built around Martin’s model and forecasts about future growth.

Source: Shaw & Partners

 

The second chart shows the price earnings (PE) ratio of the market, which at present is 15.7x next year’s forecast earnings (versus a long term average of 14.9x). This shows the market looking slightly expensive.

Source: Shaw & Partners

 

The final chart splits up the various sectors of the index, and shows how varied the PE ratio of different sectors can be e.g. while the overall market is trading at 15.5x, Resources are trading at 12.5x, whereas stocks deemed to offer “Overseas Growth” (think, CSL) are trading at a far more demanding 33.8x.

Source: Shaw & Partners

 

 

 

Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770.  The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.