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The latest JSE All Share Index PE ratio as at end of April 2019
Date: 5 May 2019 Category: Stock Market |
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We take a look at the latest JSE All Share Index PE ratio as calculated based on data released by the operator of the stock market, the JSE. The PE ratio of the All Share index increased compared to the previous month, largely due to a very strong performance of the markets during April 2018.
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All Share PE ratio over time up to end April 2019
Before we take a look at the JSE All Share PE ratio over time and the levels it is currently at, perhaps its best to explain exactly what the PE ratio measures and what it tells one about the valuation of a company and or the markets overall. In short the abbreviation PE stands for Price to Earnings.
So a PE ratio is the price over the earnings. So lets say company X is listed and its shares are trading at R100 a share. Same company X reported in their last set of results that their earnings came in at R10 a share.
This the PE ratio is R100/R10 = 10.
So its the value of the shares divided by the profits made by the company (or more broadly total value of all shares divided by total profits of all shares on the market). But now we have a PE ratio of 10. What does that tell us? What does it mean? Assuming company X will make R10 a share every year to infinity, the PE ratio of 10 tells you that in 10 years time, the company would have made in profits per share, what you are paying for the share price now. Or looked at differently R100 paid per share over PE of 10 gives you a earnings yield of 10%. Lets take an example that doesnt include so many 10's.
Company B makes a profit of R5.95 a share (and its share price is trading at R100 a share). The PE ratio would be R100/R5.95= 16.81. Thus the PE ratio of company B is 16.81. So assuming it makes R5.95 in profits each year, one would have to wait 16.81 years before profits made over 16.81 years equals what you are paying for the shares now, alternatively that's a earnings yield of 5.95% (R100 a share/ PE of 16.81 = 5.95)
So now that we know how to interpret a PE ratio, lets take a look at the monthly PE ratio's for the JSE All Share Index as well as a 13 month moving average which is indicative of a longer term PE ratio for the market as a whole.
So a PE ratio is the price over the earnings. So lets say company X is listed and its shares are trading at R100 a share. Same company X reported in their last set of results that their earnings came in at R10 a share.
This the PE ratio is R100/R10 = 10.
So its the value of the shares divided by the profits made by the company (or more broadly total value of all shares divided by total profits of all shares on the market). But now we have a PE ratio of 10. What does that tell us? What does it mean? Assuming company X will make R10 a share every year to infinity, the PE ratio of 10 tells you that in 10 years time, the company would have made in profits per share, what you are paying for the share price now. Or looked at differently R100 paid per share over PE of 10 gives you a earnings yield of 10%. Lets take an example that doesnt include so many 10's.
Company B makes a profit of R5.95 a share (and its share price is trading at R100 a share). The PE ratio would be R100/R5.95= 16.81. Thus the PE ratio of company B is 16.81. So assuming it makes R5.95 in profits each year, one would have to wait 16.81 years before profits made over 16.81 years equals what you are paying for the shares now, alternatively that's a earnings yield of 5.95% (R100 a share/ PE of 16.81 = 5.95)
So now that we know how to interpret a PE ratio, lets take a look at the monthly PE ratio's for the JSE All Share Index as well as a 13 month moving average which is indicative of a longer term PE ratio for the market as a whole.
So since January 2011, the JSE All Share average PE ratio is sitting at 17.81. As at the end of April 2019, the JSE All Share PE ratio was sitting at 18.30 (so just above the average levels since the start of 2011). And the longer term PE ratio as measured by the 13 month moving average (which has been in constant decline for some time now), came in at 18.30, at the same level that the latest PE ratio of the markets came in at. So what does it tell us about the markets and its valuation? Well market valuations have certainly come down strongly since late 2016 when the market PE ratio was around the 23 mark. Since then company profits and earnings have been disappointing sending share prices tumbling down and dragging down PE ratios with them.
It is handy to know what the overall market PE currently is, what it's longer term trend and average value is and when looking at the valuations and PE ratios of individual shares listed on the JSE one can compare individual company PE ratios and see how they compare to the overall market average PE.
So what's happened in SA equities markets in recent weeks? Well below a short summary from Peregrine Treasury Services for the last week in SA equities. Read the full weekly market wrap here.
SOUTH AFRICAN EQUITY
South African equity markets have been surprisingly strong, considering the weaker rand, against the US dollar, this week. There were however a few big losers among the crowd.
Following the class action recently taken against Tiger Brands in relation to the Listeriosis outbreak in 2018, the company’s share price was seen dropping another 5.00% on Wednesday’s trading day, following further information pertaining to the approaching completion of Oceana’s spin off from the group. On Friday morning, Tiger Brands was trading at R240.10 per share.
The medical sector continues to remain under pressure, as Life Healthcare was seen slipping over 8.00% (down around R25.00 per share on the day) on Wednesday on the back of a poor earnings numbers for the six months ending 31 March 2019. Added strain continues to flow toward the sector, as medical aid companies start to heavily address the high costs that patients incur within the walls of these medical institutions. Life Healthcare opened up Friday’s trading day at R26.47 per share, now almost flat for the year.
Some of April’s bigger movers on the JSE, as at Friday morning:
· EOH: up around 83.60%
· Telkom: up around 13.82%
· Bidvest: up around 11.97%
· Mr. Price: up around 10.65%
· Tiger Brands: down around 9.35%
· Life Healthcare: down around 2.32%
Year-to-date, the JSE All Share index is up 11.51% and the Top 40 up 12.29%, both trending up around 1.00% during the last two weeks. Sector-wise, the resource sector lost its top spot against the industrial sector over the last two weeks, as industrials have now returned 15.36% and resources 14.27% for the 2019 year so far. In last spot, SA financials have now returned 3.70% for the year.
It is handy to know what the overall market PE currently is, what it's longer term trend and average value is and when looking at the valuations and PE ratios of individual shares listed on the JSE one can compare individual company PE ratios and see how they compare to the overall market average PE.
So what's happened in SA equities markets in recent weeks? Well below a short summary from Peregrine Treasury Services for the last week in SA equities. Read the full weekly market wrap here.
SOUTH AFRICAN EQUITY
South African equity markets have been surprisingly strong, considering the weaker rand, against the US dollar, this week. There were however a few big losers among the crowd.
Following the class action recently taken against Tiger Brands in relation to the Listeriosis outbreak in 2018, the company’s share price was seen dropping another 5.00% on Wednesday’s trading day, following further information pertaining to the approaching completion of Oceana’s spin off from the group. On Friday morning, Tiger Brands was trading at R240.10 per share.
The medical sector continues to remain under pressure, as Life Healthcare was seen slipping over 8.00% (down around R25.00 per share on the day) on Wednesday on the back of a poor earnings numbers for the six months ending 31 March 2019. Added strain continues to flow toward the sector, as medical aid companies start to heavily address the high costs that patients incur within the walls of these medical institutions. Life Healthcare opened up Friday’s trading day at R26.47 per share, now almost flat for the year.
Some of April’s bigger movers on the JSE, as at Friday morning:
· EOH: up around 83.60%
· Telkom: up around 13.82%
· Bidvest: up around 11.97%
· Mr. Price: up around 10.65%
· Tiger Brands: down around 9.35%
· Life Healthcare: down around 2.32%
Year-to-date, the JSE All Share index is up 11.51% and the Top 40 up 12.29%, both trending up around 1.00% during the last two weeks. Sector-wise, the resource sector lost its top spot against the industrial sector over the last two weeks, as industrials have now returned 15.36% and resources 14.27% for the 2019 year so far. In last spot, SA financials have now returned 3.70% for the year.