Valuations Remain Elevated, Differentiation Increases
* At 21.3x NTM P/E, the aggregate valuation of large cap global staples stocks is up half a turn from the prior month and remains elevated since the sharp increase late last year.
The standard deviation of NTM P/Es for consumer staples stocks is 1.6, its highest level since early 2009. It
is up from the ten-year low of 0.7 in June of 2013 and up compared to last month's average of 1.4. It is higher than the ten-year average of 1.5, and the max of 2.7. This indicates that differentiation between the growth potential of
individual stocks has been increasing over the past few months.
* US consumer staples stocks trade at a NTM P/E of 20.0x, over four turns above the 10-year average.
The S&P consumer staples index relative premium vs. the S&P500 moved down slightly in February, but it is
still above the long term average. The consumer staples index now trades at a 16.2% premium, above the long-term average of 14.6%. Stocks with the highest relative premiums to the sector are MNST at 105% and EL at 32%.
Stocks with the largest discounts are CCE, K, and GIS with 13%, 13%, and 9% discounts to the sector, respectively.
* The European consumer staples index remained elevated at a NTM P/E of 20.2x after trading up sharply in January – setting a new 10 year high.
The index has been above the +1SD level since March 2014 after climbing from -1SD in June 2012. Against the MSCI Europe, it is trading at a 29.7% premium, slightly below its long term average of 31.2%. The relative NTM P/E premium for European consumer staples is down slightly from last month, with the valuation remaining stable while the MSCI Europe index rerated one turn. Stocks with the highest relative premium to the European consumer staples sector are BEI at 37% and OR at 32%. Stocks with the largest discounts are IMT, CARL'B and BATS with 25%, 17%, and 13% discounts to the sector, respectively.
* In other markets, NTM P/E trends are less clear.
Latin American staples valuation trends were mixed this month, while South African staples multiples moved lower off recent highs. Most Japanese staples multiples moved higher over the past month.
* In this monthly publication, we show the trends in the consumer staples sector for the U.S., Europe and a number of global stocks. We also trace 10- year historical, absolute, and relative NTM P/E multiples of global consumer
staples stocks.