blog

Latest from the Quantamize Blog

Emerging Markets Trading at Largest Discount to S&P 500 in 10 Years

Oct 04, 2018

  • The MSCI Emerging Markets Index (MXEF) is trading at the largest discount to the S&P 500 since October 10th, 2008 on an NTM P/E basis.  
  • The MSCI Emerging Markets Index's NTM P/E of 10.81x represents a 35.58% discount to the S&P 500’s NTM P/E of 16.80x.  
  • Consensus forecasts 1-year EPS growth of 13.09% for the MSCI Emerging Markets Index while the S&P 500’s sits at 24.90%.  
  • The S&P 500’s return on equity (ROE) of 15.80% is more attractive compared to the MSCI Emerging Markets Index's ROE of 12.63%.  
  • Despite fundamentally lower ROE, the MSCI Emerging Markets Index maintains slightly higher profitability with a net profit margin of 9.85% compared to the S&P 500’s 9.74%.  
  • With the MSCI Emerging Markets Index trading at the largest discount to the S&P 500 in 10 years, investors may want to consider diversifying into emerging markets. This is further reinforced by the MSCI Emerging Markets Index's on-par profitability compared to the S&P 500.  

S&P 500 Index (SPX) vs MSCI Emerging Markets Index (MXEF) NTM P/E since 2010

Source: Bloomberg

MXEF/SPX NTM P/E Ratio since 2010

Source: Bloomberg