Once I have a look at US shares, I generally despair of the FTSE 100.

Our pricey previous Footsie is up 11.3% previously 5 years. The interval does embody the pandemic and the 2020 inventory market crash. So possibly that’s not too unhealthy?

Nicely, the US went by precisely the identical pains. However over there, the S&P 500 has gained 93.7% in the identical interval (on the time of writing).

Go west?

US buyers have been making an attempt to woo UK corporations to cross the Atlantic and record in New York as a substitute of London.

In June this yr, Emma Walmsley, CEO of UK prescribed drugs large GSK (LSE: GSK) felt the necessity to guarantee the market that the corporate had no intention of giving up its UK itemizing.

She identified that GSK spends greater than £1bn on research and improvement per yr on this nation, and employs 11,000 individuals. That’s regardless that solely a small quantity of its earnings come from UK gross sales.

Valuations

Once I have a look at the GSK valuation, I’ve some sympathy for shareholders who may prefer to see it abandon the UK inventory market.

We’re taking a look at a forecast price-to-earnings (P/E) ratio of 12, lower than the FTSE 100 long-term common. And with earnings progress anticipated for the following few years, that might drop to beneath 9 based mostly on 2026 forecasts.

Evaluate that with Eli Lilly, for instance, on the US inventory market. That’s on a ahead P/E of 57 for this yr. Once more, there’s earnings progress on the playing cards. However it could nonetheless depart the P/E at 32 for 2026.

Eli Lilly shares are value round 4 to 5 instances the worth of GSK shares, on that foundation.

Britain’s AstraZeneca, which nonetheless appears to be having fun with a few of its Covid vaccine increase, has P/E multiples someplace in between, within the twenties.

Dividends too

Nonetheless, if US pharma shares are valued rather a lot larger than UK ones, not less than the dividend scenario is in our favour.

Eli Lilly is on a dividend yield of simply 0.6% based on forecasts for this yr. GSK, in the meantime, appears to be like set to reward shareholders with a far juicier 3.9%. So there’s a a lot decrease inventory valuation, however 6.5 instances the annual money reward.

In actual fact, that displays the 2 indexes as a complete.

Proper now, the S&P 500 is on a mean P/E of about 28 to 29 (relying on who we ask). And the common dividend yield is about 1.25%.

The FTSE 100 is valued at about half the P/E, round 14 (once more relying on the supply, and there’s some variation in estimates). However the forecast dividend yield is up at 3.5%.

Development vs revenue

Regardless of the cause for the variations, I don’t suppose there’s a transparent case for both the FTSE 100 or the S&P 500 being typically higher for buyers.

Perhaps the S&P is best for progress buyers and the Footsie for revenue buyers?

It needs to be down to private alternative. However when making that alternative, do beware that previous efficiency will not be a assure of future efficiency.