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We take a look at the latest South African Stock Market , the 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 JSE All Share Index increased a bit compared to the month of May 2019 largely due to stronger stock markets during June 2019 See our JSE Calendar tracker for more on market movements |
All Share PE ratio over time up to end June 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 17.78 As at the end of June 2019, the JSE All Share PE ratio was sitting at 18.14 (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 18.04, at just below the 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
Down around 2.96% since last Friday, Truworths share price was seen falling over nine percent over the course of Tuesday and Wednesday, based on the back of news that the retail firm would be looking to restructure their debt pile, which now sits at around R800 million. Over the last 18 months, foot traffic through most retail stores has declined by more than two percent, mainly due to a slowing global economy. Truworths’ U.K. shoe wear company called Office, generated around 27.00% of the company’s revenue and ten percent of their overall profit, but remains the main contributor to the company’s growing debt pile in an extremely competitive footwear industry. Truworths opened Friday’s trading day at R68.49
Anheuser-Busch InBev have made a move to list on the Hong Kong Stock Exchange in order to sell off parts of its Asia Pacific beer unit. Trading of the shares will officially commence on 19 July 2019. AB Inbev opened Friday’s trading day at R1,315.00
Quilter is said to be mulling over the sale of their Old Mutual Wealth Life Assurance business in the U.K. The potential sale of the Old Mutual Wealth Life Assurance is not necessarily related to the net outflows witnessed in 2018, if connected at all. This decision rather forms part of the company’s long-term strategy to strip non-core assets from out its business model, as Old Mutual Wealth Life Assurance has never been part of Quilter’s main strategic focus. Should the sale occur, a special dividend could possibly be distributed to shareholders, while any remaining profits from the sale would be invested into bettering the company’s vertical integration as a whole. This would potentially mean a positive outcome for all parties. Quilter opened Friday’s trading day at R25.90
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that the resource sector’s performance stands head and shoulders above most others:
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 18.04, at just below the 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
Down around 2.96% since last Friday, Truworths share price was seen falling over nine percent over the course of Tuesday and Wednesday, based on the back of news that the retail firm would be looking to restructure their debt pile, which now sits at around R800 million. Over the last 18 months, foot traffic through most retail stores has declined by more than two percent, mainly due to a slowing global economy. Truworths’ U.K. shoe wear company called Office, generated around 27.00% of the company’s revenue and ten percent of their overall profit, but remains the main contributor to the company’s growing debt pile in an extremely competitive footwear industry. Truworths opened Friday’s trading day at R68.49
Anheuser-Busch InBev have made a move to list on the Hong Kong Stock Exchange in order to sell off parts of its Asia Pacific beer unit. Trading of the shares will officially commence on 19 July 2019. AB Inbev opened Friday’s trading day at R1,315.00
Quilter is said to be mulling over the sale of their Old Mutual Wealth Life Assurance business in the U.K. The potential sale of the Old Mutual Wealth Life Assurance is not necessarily related to the net outflows witnessed in 2018, if connected at all. This decision rather forms part of the company’s long-term strategy to strip non-core assets from out its business model, as Old Mutual Wealth Life Assurance has never been part of Quilter’s main strategic focus. Should the sale occur, a special dividend could possibly be distributed to shareholders, while any remaining profits from the sale would be invested into bettering the company’s vertical integration as a whole. This would potentially mean a positive outcome for all parties. Quilter opened Friday’s trading day at R25.90
Here’s some of the bigger movers on the JSE for the 2019 year so far, painting a relatively clear picture that the resource sector’s performance stands head and shoulders above most others:
- Impala Platinum: up 99.59%
- Kumba Iron Ore: up 79.83%
- Sibanye Gold: up 59.18%
- Tongaat Hulett: down 76.32% (trade halted)
- Rebosis Property Fund: down 74.35%
- Omnia: down 62.66%
- Brait: down 36.33%