Are Australian equities expensive or good value

Are Australian equities expensive or good value? On FNArena's calculations, after removing noise and outliers, the market is currently on a PE of 17. This becomes 15 when we use FY15 estimates instead of FY14 (reporting season will be soon upon us). Given the long term average is 14.5x, both PEs suggest the market is expensive. A more detailed analysis shows, however, the present market consists of a small group on premium valuations and a much larger group on below average PE. This raises the question whether the average PE can still be used as a reliable indicator for today's share market? In terms of consensus EPS growth, FNArena's clean numbers show 11% growth for FY14 and 10.7% for next year, though the trend seems to suggest more cuts are coming. My Weekly Insights this week: (VIEW LINK)

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