Two-Pronged Valuation Method Shows BRICs Still Cheap

As much as value investors like to lean on PE multiples to identify cheap stocks, using it to compare companies in different markets often means ignoring other important, systemic factors (eg political risk or monetary accommodation) that effect valuations. To help make up for that, Jon Harrison and Arnab Das of emerging market research firm Trusted Sources look at a country’s market cap to GDP ratio as a second measure of richness, and by that standard the BRIC countries are starting to look attractive.

“Brazil and Russia’s GDP growth has slowed the most sharply since the financial crisis. Yet, equity market capitalizations have failed to keep up with even this low growth, leaving these markets cheap on this...