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Are European Stocks a Good Deal?

European stocks cheaper than during last recovery, as profits rebound, but some analysts still see clouds on the horizon.

By Inyoung Hwang and Namitha Jagadeesh, Bloomberg | Updated on August 12, 2013

European stocks have risen half as much as global benchmarks this year, leaving them cheaper than equities in the U.S. and Asia as the region’s economy starts to recover from the longest recession on record.

After a 7.2 percent gain in 2013, the Euro Stoxx 50 Index trades at 12.5 times projected earnings, 6.7 percent less than in 2009, the last time the euro area was in the final quarter of a contraction, data compiled by Bloomberg show. In the U.S., where the economy is in its 10th straight quarter of growth, the Standard & Poor’s 500 Index is valued at 15.3 times estimated profit and Japan’s Topix trades at 14.2 times income after Prime Minister Shinzo Abe vowed to end two decades of deflation.

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