FYI: Investors always want to know what’s cheap—cheap relative to the opportunity set and relative to history. Cheapness could refer to any number of things—price relative to trailing twelve months earnings, to trailing earnings over multiple years, to analyst earnings estimates, to long-run projections, or a dozen other variations based on sales, cash flows, book value, etc.
Because analyst estimates tend to be tainted for a number of different reasons (see this discussion on why), we tend to focus on price relative to trailing twelve month sales, cash flows, and earnings to measure cheapness. This gives a more holistic and objective view of valuation.
Using this simple construct, we’ll give every investable stock across the globe a percentile valuation score from 1-100. Scores are then rolled up to countries and regions to get value scores for each relative to the entire global stock market. Our universe will be all stocks with a market cap greater than an inflation adjusted $1 billion (USD) and with reasonable daily liquidity from 1990-2018.*
Regards,
Ted
https://www.factorinvestor.com/blog/where-is-the-value
