ASX Coming Back to Earth but Still Has Further To Go

Wide-moat rated ASX Limited has had a tough start to fiscal 2021. The share price has fallen 22% since it reached its all-time high of AUD 91 last September and has significantly underperformed the 10% increase in the S&P/ASX 200 Index over the same period. The share price peak coincided with a peak in ASX’s 1-year forward P/E ratio, at 36 versus an average P/E of 21 over the past decade. Interestingly, the ratio of AXS’s P/E ratio to the S&P/ASX 200 index, peaked at over 2 last March and has since fallen to 1.4, which is equal to its average over the past decade. We’re not surprised by the share price weakness considering ASX has exceeded our AUD 59 fair value estimate for some time.