June 11, 2021
As the US equity markets reach new all-time highs, investors are in search of attractive opportunities. Looking at forward price-to-earnings (P/E) ratio ranges by style, small-cap value is the only segment currently trading within its interquartile range over the past 10 years. At 15.0x forward earnings, the Russell 2000 Value Index is near the 50th percentile of its historical range, whereas almost every other style box segment is trading at or above the 95th percentile.
Forward P/E ratio ranges during the past 10 years
Note: P/E measures exclude negative earnings. Forward P/E is on Institutional Brokers Estimate System (I/B/E/S) consensus next-12-months forecast earnings.
Sources: BofA US Equity & Quant Strategy, Russell Investment Group, I/B/E/S, and Compustat. Time period is 10 years from April 2011 to April 2021.
Past performance does not guarantee future results.
Investing involves risk, including the possible loss of principal.
What this means for investors
Given current valuations across US market segments, small-cap value offers the most attractive relative valuation.