The table below lists the CAPE Ratio & P/E (TTM) of the FTSE 100 and FTSE 250 indices. The current Shiller PE of the FTSE 100 is 15.64 (12/31/2021), considerable lower than the corresponding ratio of FTSE 250. The trailing twelve month P/E is currently 14.86.
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FTSE 100 / FTSE 250 – P/E (TTM) & CAPE Ratio
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FTSE 100 & 250 indices
FTSE 100 stock index is the most followed indicator for the performance of the London Stock Exchange and UK’s stock market. The combined market value of the companies part of the index is £2,154,237 million. (Jan 31st, 2021). The largest index constituents (index weightings in brackets) are Unilever plc (6.31%), AstraZeneca plc (5.76%), HSBC Holdings (4.57%) and Diageo plc (3.96%). Among the ICB sectors, Personal & Household Goods has the largest weighting, followed by Financial Services and Industrial Goods & Services. Majority of the earnings of the index companies come from abroad so the index is not often used as a benchmark for the economic conditions in the UK.
For domestic market conditions, FTSE 250 index is a much better indicator. This index represents 250 mid-cap stocks traded on the LSE and has the total market cap of £39,822 million (Jan 31st, 2021). The largest index consituents are Weir Group, F&C Investment Trust, Direct Line Insurance Group and G4S. For the past 10 years, FTSE 250 has outperformed (year-on-year total return) FTSE 100 index seven times out of ten.
Shiller PE ratio
The idea behind the CAPE ratio is that one year earnings are too volatile to be used to estimate the real market value of a company. Considering the average longer term earnings can often give a more accurate view of a firm’s capacity to create value. The ratio has become an essential indicator for value investors to estimate the valuations of a certain market/index/country.