Historically low valuations are tempting on the stock market

Dusseldorf Strong price losses on the one hand and record-high corporate profits on the other are causing stock valuations to plummet. In a global comparison, the decline in valuations is particularly pronounced in Germany. One reason for this is the skeptical expectation of many investors that company profits could fall in the future in view of soaring energy prices, the threat of gas shortages and the global economic downturn.

For the stock market, this means that the timing for an entry into companies with a particularly low price-earnings ratio (P/E) could be good right now. The Handelsblatt gives an overview of which companies are specifically affected.

The benchmark for the evaluation is the market capitalization of a company in relation to its net profit. For example, two stocks from the MDax are currently trading at a price-earnings ratio of 1.6. That means whoever buys those shares is paying for them and compounding the two companies at just 1.6 times their last four quarters’ net earnings. That is historically little.