Is the sky the limit?
We can question the fundamental value of certain goods like copper, the bitcoin or an Empire-era semainier. The problem with these three assets is that they do not detached dividends, so it is difficult to value them from a financial point of view. Their value lies in the utility they provide and their price is therefore a function of preferences.
For financial assets that detach a coupon, valuation is somewhat less subjective. For stocks, there is even the socalled book value that evaluates the net assets of the company. This valuation is generally a liquidation value (difference between the forced sale of assets and the debt). If we compare the market value to the book value, we get the price-to-book. The higher this ratio, the more investors will value the book value of tomorrow; in other words, the ability of the company to do better in the future.
LVMH and l’Oreal – the two largest French stocks – have benefited from an extraordinary enthusiasm in this cycle. Last year we thought that this phenomenon was linked to the sanitary crisis: a quest for secure growth companies ina world in growth deficit. But in 2021 the phenomenon continues, or even accelerates !
Below we compare these two leaders with the three previous leaders: BNP, Sanofi et Total.
The table can be read as follows: each TotalEnergies employee generates 109k euros in profits, which is twice what an employee at LVMH does. However, his work is valued half by the financial markets. The work of a BNP employee is valued 7 times less than the work of a L’Oréal employee.
The Italian index has not made its revolution
All time low! If we look at the price-to-earnings ratio (PER), the equity Italian index looks extreme since its discount against the Eurostoxx 50 index is at its lowest. This is striking enough given that we are neither in 2009 during the financial crisis, nor in 2012 during the public debt crisis in the euro […]
Equity Market: the US vs. The Rest of the World
FACTS Equity valuation has always been a well commented subject in our industry. The notion of fundamental value is dear to many investors who refuse to believe that the equity markets can be just a casino. Historically, we see that equity valuation ratios move quite erratically. With a macro approach we find variables with more […]