Feb. 15, 2008 - Courtesy: Bespoke Investment Group
Once again the folks at Bespoke have published something very unique. They are the best at producing clear eloquent tables and charts. Below is the one of the most interesting statistics that we have seen in a long time.
Many investors look at a stock’s PEG ratio as a valuation metric that takes growth expectations into account. The PEG ratio is a stock’s P/E ratio divided by its estimated growth rate. Generally, a PEG of less than 1 is considered positive because growth estimates are higher than the stock’s P/E.
With that in mind, we created a PEG ratio for major countries using the P/E ratio of each country’s major equity index and its estimated GDP growth in 2008. While some countries have a low P/E ratio, they also have low growth prospects (Spain and France), so their valuations are not as attractive. Countries that are the most attractive are ones with low P/E ratios and high GDP growth, giving them a low PEG ratio. Countries that are the least attractive have high P/E ratios and low growth prospects.
Below we highlight the country PEG ratios for 22 countries that have trackable ETFs. As shown, Russia tops the list with a P/E of 11.17 and estimated GDP growth of 6.8%. This gives Russia a country PEG of 1.64. Other countries with strong PEG ratios include Singapore, Malaysia, Hong Kong, India and South Africa. Unfortunately, the US is second to last on the list with a PEG of 10.26. The S&P 500’s P/E ratio is 18.46 while its estimated GDP growth this year is 1.8%. The US is barely ahead of Japan, which is last on the list with a PEG of 10.31.
