Analysts including those at JPMorgan are salivating at the valuations of European stocks and say now is the time to buy.
Goldman Sachs in a note published Friday says, not so fast.
So, yes, European stocks do trade at around a 19% discount to the U.S., the Goldman Sachs strategists say, but the discount halves once the sector composition of the two is adjusted.
The PEG ratio – the ratio of price-to-earnings to EPS growth – are similar in both regions, too.
The fundamentals are weakening at roughly similar levels for both European and U.S. stocks, the Goldman strategists add, with 2019 EPS estimates both falling by around 5% in each region since the start of the year.
It would take an improvement in manufacturing data to lift Europe, the Goldman strategists say, but they don’t see one coming.
Goldman kept an overweight rating on U.S. stocks and a neutral on European ones.
This year, the Stoxx 600 in dollar terms has climbed about 7%, compared to a 17% gain for the S&P 500 .