Global Market P/E Ratios

PE Ratio

The PE Ratio score is calculated using the percentile rank, which allows users to evaluate how expensive or cheap an index is relative to its own PE ratio over the last 25 years.

• The PE ratio for an index in a given month is considered along with its previous monthly PE values since January 2001.
• If the current value falls within its 90th percentile over the last 25 years indicates that it is highly overvalued, and similarly, a PE value falling in the lowest 10th percentile over the last 25 years indicates that it is highly undervalued. The score is calculated adequately.

CAPE Ratio

CAPE ratio compares the price of an index to its 10-year average inflation-adjusted earnings, smoothing cyclical fluctuations. The scores are assigned based on deviation from PE ratios, as it provides a referential context.

• A CAPE value near the current PE earns a higher score, suggesting undervaluation.
• A CAPE significantly lower than the PE ratio indicates the possibility of a potential rebound, but may also indicate systemic problems and geopolitical risks and is therefore penalised.
• Similarly, a high CAPE ratio is penalised due to the high risk of mean reversion and overheated earnings risk signalling higher valuations.

Forward PE Ratio

Forward PE is also scored relative to the current PE levels. It is a reflection of overall future optimism about the earnings from the index.

• A lower value indicates better future earnings yield and results in higher scores.
• A high Forward PE leads to scoring penalties due to valuation risk or pessimistic outlook.
• An extremely low Forward PE value indicates an over optimistic outlook, or also the factor that the markets might already be pricing political instability or currency risks.

5-year historical PEG Ratio

Historical PEG Ratio scores are calculated based on 5-year annualised growth in earnings per share for an index. The scores are calculated to reward growth at reasonable price levels. Ratios around 1-1.8 are categorised as Fairly Valued, receiving a neutral score, whereas values below 1 indicate that the index is undervalued and receive higher scores (ratio between 0.5–1 gets the highest score). Extremely high or negative PEGs (due to declining earnings) are penalised. Scores are calibrated using a banded scale to avoid over-rewarding unsustainable growth or deeply cyclical downturns.

Forward PEG Ratio

Forward PEG uses 1-year earnings growth forecasts. Scores favour ratios between 0.5-1, indicating healthy earnings at modest valuations. Forward PEGs above 1.8 and negative PEGs are penalised due to implied risk or volatility. It offers a dynamic, sentiment-sensitive valuation-growth composite signal.