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P/E ratio enhances attractiveness of UAE stock markets

The UAE stock markets have maintained their competitive edge in the Gulf and Middle East region over the past period, as their average Price Earnings Ratio (P/E Ratio) stood at 12.43 times over the past 12 months, according to recent statistics released by the Abu Dhabi Securities Exchange and Dubai Financial Market.

The most popular metric of stock analysis, the P/E Ratio is the relationship between a company’s stock price and earnings per share (EPS), with long-term investors commonly using the ratio and the dividend yield as asset allocation signals.

Thanks to the significant dividends announced by listed companies for their shareholders, UAE stocks are expected to lure more investors and facilitate more capital inflows to the market.

Logistics and transport services topped the list of most attractive platforms, with a P/E ratio of 6.65 times, followed by the contracting sector, 7.35 times; realty sector, 9.85 times; banking, 9.94 times and then insurance companies, 10.69. The P/E ratio of the hospitality sector stood at 11.34 times, followed by the services sector, 11.42 times, and energy sector at 11.62 times.

The P/E ratio is calculated as a stock’s current share price divided by its EPS for a twelve-month period, usually the last 12 months, also called the trailing 12 months. Most of the P/E ratios for publicly traded stocks are an expression of the stock’s current price compared with its previous 12 months’ earnings.