Societe Generale strategists say the pool of equities that would traditionally be labeled as deeply cheap has shrunk markedly in both Europe and Japan. In a note prepared by the team that includes Andrew Lapthorne, the bank's quantitative strategists find that many of the stocks that were previously viewed as inexpensive have experienced substantial appreciation since the end of 2024.
The strategists report that those once-perceived cheap names have climbed by an average of 60% since the end of 2024, producing an overall upward shift in market valuations for the regions in question.
Using a single valuation yardstick - the 12-month forward consensus price-to-earnings ratio - the team quantifies how rare extreme cheapness has become. Within the MSCI Europe index, just 3% of constituent stocks now trade with a forward P/E below 8 times earnings. That contrasts with a 15% share at the end of 2024, a level the note describes as roughly twice the historical average.
Japan shows a similarly marked decline in bargain-priced listings. The strategists state that fewer than 2% of Japanese stocks currently trade at the extreme-cheapness threshold, down from 8% at the end of 2024. At the same time, the team observes an increase in the number of Japanese companies trading at multiples above 33 times earnings.
By contrast, the note finds U.S. valuations have been mostly static. The strategists remark that the United States has not had a meaningful presence of extremely cheap stocks for some time, implying that the recent shifts in Europe and Japan represent a notable change relative to those markets.
The conclusions in the Societe Generale note are strictly based on the 12-month forward consensus P/E ratio and do not incorporate other valuation measures or adjustments. The findings highlight how the distribution of valuations across global equity markets has evolved since the end of 2024.
Methodology
The analysis cited uses stocks' 12-month forward consensus price-to-earnings ratio as its sole metric for assessing cheapness and expensiveness.