Stocks Are Not Expensive, Margins Are Quite Average: RBS

Stock prices have been driven by multiple expansion this year, and PE dispersion is historically low, leaving some analysts to conclude that there aren’t any cheap stocks left to buy, but Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) head of cross asset strategy John Briggs and US equity strategist Robert Ross think that looking at the price to earnings ratio by itself can be misleading.

RBS on stocks valuation

“We do not think stocks are expensive. In fact, in our view, valuations are quite average,” write Briggs and Ross. “We do see that stocks, at ~16x, are on the higher side of their typical 13 - 17x multiple. But that valuation approach ignores the exceptional...