Smaller US-listed companies are trading at a steep discount compared with their larger peers, highlighting how corners of the market remain relatively inexpensive despite the big rally from the depths of the coronavirus crisis.
The S&P 600 gauge tracking the smallest stocks by market value on the index provider’s composite US equities barometer is priced at 14.5 times expected earnings over the next year, according to FactSet data. The valuation is well below the 21.3-times for the benchmark S&P 500 index, which tracks America’s corporate behemoths such as Apple, Facebook and Tesla.
That leaves the S&P 600 price-to-earnings ratio at about 68 per cent of the S&P 500, among the lowest levels since the dotcom bubble at the turn of the millennium. Small-capitalisation value stocks, companies that are considered to be priced inexpensively when compared with corporate fundamentals like book value, are trading at an even steeper discount as investors have piled in to quickly-growing companies instead, according to William Heaphy, head of William Blair’s value equity team….
