{"id":64335,"date":"2026-05-06T09:24:31","date_gmt":"2026-05-06T09:24:31","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?page_id=64335"},"modified":"2026-05-30T03:25:59","modified_gmt":"2026-05-30T03:25:59","slug":"asx-stock-market-valuation-indicator","status":"publish","type":"page","link":"https:\/\/thepatientinvestor.com\/index.php\/asx-stock-market-valuation-indicator\/","title":{"rendered":"ASX Stock Market Pricing"},"content":{"rendered":"
\"Stock<\/div>\n

Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing<\/strong>. High market valuations should not be taken as a sell signal. “Markets can remain irrational for longer than you or I can remain solvent” John Maynard Keynes is purported to have said. However, we advise caution if you are considering new positions or adding to existing positions when stock prices are high.<\/p>\n

Stock Pricing<\/h2>\n

ASX stock pricing increased to 76.73 percent from 76.43 percent last week. Our highest reading was 92.23 percent in August 2025, with a low of 67.85 percent in April 2025.<\/p>\n

\"ASX<\/p>\n

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.<\/p>\n<\/div>\n

Buffett Indicator<\/h3>\n

The Warren Buffett indicator compares stock market capitalization to GDP, providing a stable, long-term ratio unaffected by fluctuating profit margins. The ratio’s value of 1.13 for April 2026 is high but not excessive compared to its long-term mean of 1.02.<\/p>\n

\"ASX<\/p>\n<\/div>\n

ASX 20 Price-to-Sales Ratio<\/h3>\n

The Price-to-Sales ratio for the ASX 20 increased slightly to 4.27 from 4.25 last week. We use a 20% trimmed mean of the Price-to-Sales ratio for index stocks to remove the highest and lowest readings, which tend to distort the average.<\/p>\n

\"ASX<\/p>\n<\/div>\n

ASX 20 Forward Price-Earnings Ratio<\/h3>\n

The Forward Price-Earnings ratio for the ASX 200 eased to 19.24. We have limited data on the ASX 20 forward PE, but it still provides a useful measure of current value. We use a 20% trimmed mean to avoid distortions of the average caused by outliers.<\/p>\n

\"ASX<\/p>\n<\/div>\n

All Ordinaries Price-Earnings Ratio<\/h3>\n

The price-to-earnings (PE) ratio is based on the latest trailing earnings (red below), but produces extreme readings if earnings per share (EPS) rises or falls sharply, as in 2008 or 2020.<\/p>\n

\"ASX<\/p>\n<\/div>\n

All Ordinaries PE of Highest Trailing Earnings<\/h3>\n

We use a Price-Earnings ratio based on highest trailing earnings for the All Ordinaries Index to eliminate extreme readings when earnings fall sharply. However, the ASX has high earnings volatility, due to the resources commodity cycle impact on earnings. This boom-bust effect necessitates the use of both price-earnings ratios — based on trailing earnings and highest trailing earnings — to provide a more balanced view.<\/p>\n

\"ASX<\/p>\n<\/div>\n

All Ordinaries Dividend Yield<\/h3>\n

The All Ordinaries dividend yield is below its long-term mean of 4.1%, indicating values are on the high side.<\/p>\n

\"ASX<\/p>\n

Lower yields indicate higher values, so we reverse the z-score for the ASX dividend yield.<\/p>\n<\/div>\n

Conclusion<\/h2>\n

Stock pricing remains high, with risk of a significant drawdown.<\/p>\n

Acknowledgments<\/h4>\n