World Market Valuation Heat Map

26 Comments Posted by on January 26, 2011

Based on data provided by Aswath Damodaran, Professor of Finance at NYU, I have created the following world market valuation heat map. Big thanks to Prof. Damodaran for making this data available to the public.

The data is as of January 2011 and includes all publicly traded US firms and all those with a market cap greater than $5 million for non-US firms. Value Line is the source for US data and a combination of Bloomberg and Capital IQ for non-US data.

Countries where data was available for thirty or more firms were ranked by equally weighting Price/Earning, Price/Book and Price/Sales ratios. More specifically, for those wonkishly inclined, the z-score for each metric was used in order in properly weight the possibility of a similar relative metric rank but a significant absolute difference. The color scale runs from dark green (cheapest) to dark red (most expensive).

According to this valuation method Japan and developed Europe appear to be the cheapest markets (no big surprise) with Asia and the big commodity players (Australia and Canada) being the most expensive. The US comes out in about the middle; 36th out of 71 countries ranked. See map below.

World Valuation Heat Map

Unfortunately, I was unable to make the chart larger to view detail but an expanded view of each region can be seen below.

Africa

Asia

Europe

Middle East

South America

Using broad sub groupings Japan is the cheapest broad market (not country) with Africa and the Middle East being the most expensive. See table below.

Global Valuation by Region

I plan on following this up with more detail into individual country markets so stay tuned.

Macro ,

26 responses to “World Market Valuation Heat Map”

  1. T. Neumann January 26, 2011 at 10:45 pm

    This is an impressive website!!

    Reply
  2. Nicolas January 27, 2011 at 1:06 am

    Excellent job as usual

    Reply
  4. derek January 28, 2011 at 4:03 am

    good stuff, 1st time visitor but love to see names like Crestmont, etc. on blogroll!

    Reply

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  7. the_new_z January 28, 2011 at 3:52 pm

    Wow, great job! Care to share how you laid the data on the map? What tools did you use?

    Reply
    • seekingdelta January 28, 2011 at 4:08 pm

      Thanks. I built a macro in excel to format the data and then the google api program to lay the data on the map.

      Reply
  8. Ben January 28, 2011 at 9:34 pm

    Somebody has bad data. Thomson-Reuters (via Financial Times) gives these PE ratios, which are significantly different from yours:
    China 13.2
    Canada 19.8
    India 22
    Australia 15.3

    http://markets.ft.com/ft/markets/researchArchive.asp?report=RAT&ftauth=1296275430790

    Reply
    • seekingdelta January 29, 2011 at 12:10 am

      Couple reasons that data is not directly comparable to the Broad Sub-Groupings listed in the table.

      #1 FT data is only a sample of stocks comprising 75% of market cap. Significant difference possible from methodology laid out above.
      #2 For China the broad group includes Hong Kong and Macau. For Australia it includes New Zealand and Niger.

      Reply
      • Ben January 29, 2011 at 7:47 pm

        It’s hard to see how that could explain the discrepancy, especially for China where the discrepancy is large. Hong Kong’s PE is 15.7 (according to the FT), so that still wouldn’t produce a PE of 19.4. There’s not a country anywhere near China that has a PE of 19, according to the FT. The discrepancy in the data for Canada is also quite large.

      • seekingdelta January 30, 2011 at 1:57 am

        Ben, The other possible scenario is that the FT data is market cap weighted while Damodaran’s data is equal weighted. I will research more and see if I can come up with an answer.

      • seekingdelta January 30, 2011 at 10:53 am

        It appears that Damodaran is calculating the country PE as aggregate market cap (column G in country files) divided by aggregate trailing earnings (column AW). You can find the data here. I would think the difference between FT and Damodaran PE are:
        1. Different population of companies used.
        2. Timing of earnings. It appears Damodaran is using fiscal year end earnings so if a company has a fiscal year end of 12/31/2010 the 2010 financials would not be available for the Jan ’11 file so therefore 2009 year end earnings would be used.

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  10. JC January 29, 2011 at 6:06 am

    The world market valuation heat map is one of the most useful information sources I have seen in a long time. This is the first time I’ve seen in one place, a comprehensive view of global opportunities. The maps provide context and setup for a variety of trading and investment strategies. PLEASE keep this work up each quarter or so. But links to other sites like dshort, seeking alpha, or my own email when you have this information calculated would be tremendously helpful. Contact me via email and I’ll share some ideas I have for trading.

    Excellent work again!

    Reply

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  14. David January 31, 2011 at 3:21 pm

    This is great. Please keep posting this info on an ongoing basis if you can.

    I have long suspected that Japan was undervalued, but it’s very hard to nail down apples-to-apples valuation comparisons. I may be buying a little EWJ soon.

    Reply

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  19. Sanchez B February 5, 2011 at 10:14 am

    Wonderful work! I think your translation of Damodaran’s data to an easily digestible visual format is brilliant. Would you be willing to take it one step further? Perhaps provide a risk rating for the economies? I can suggest a few sources for data:

    1. Political instability index: http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0

    2. Transparency International’s corruption perception index : http://www.transparency.org/policy_research/surveys_indices/cpi/2010

    It would be wonderful to have an idea of how the reward (% undervalued) relates to the risk of the country (Stability and Corruption ranks.)

    Reply
    • seekingdelta February 5, 2011 at 10:19 am

      Nice idea. Thanks. I plan on updating this monthly, starting in February and will consider adding a ‘risk rating’.

      I think I will need to tweek valuation data source, as I don’t think Damodaran updates monthly, so it would be a good time to add an additional metric.

      Reply

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