Are Eurozone Stocks Really That Cheap? Look At ROE, Says Citi

European equities are considered to be cheap relative to US equities, after the latter went through a year of strong multiple growth, but this is only true if earnings begin to recover on time so that normalized earnings give an accurate picture of euro area stocks’ value. “European equities look expensive when valued using current earnings, but cheap if we assume normalized Earnings,” writes Morgan Stanley analyst Matthew Garman. “The investment case for owning European stocks is heavily dependent on the extent of ROE recovery.” Normalized PE can obscure permanent drops in value Normalized earnings are often used for valuations…