Stock markets: an Italian record – just nine years of profits to recoup market capitalisation

It took less than twelve years to recoup the value of its market capitalisation through profits. It was certainly no secret that the last decade had been exceptional for stock markets around the world and for the companies listed on them; however, the Capital Group study adds a further layer to the backdrop that partly explains one of the longest-running share market rallies ever seen. And it assigns Italia a leading role that is most unexpected.

According to the findings set out in Value Watch, an integral part of the Global Equity Study published periodically by the US asset management firm, at the start of 2014, the 1,600 largest listed companies worldwide had a combined market capitalisation of 35,300 billion dollars. From then until the end of 2025, they generated a total of 36,700 billion dollars in profits, thereby effectively regaining their entire initial market value.

 The figure relating to the so-called Equity Payback Period appears even more significant in hindsight, given that at the start of the period under consideration the global price-to-earnings ratio stood at 15.9 times. In other words, investors would theoretically have had to wait until 2029 to achieve the aforementioned target, but the speed with which profits were generated made it possible to shorten this timeframe – and by a considerable margin.

The surprise comes when one looks into the geographical differences, because our country has outperformed all others in this particular area. In fact, it took just nine years for companies listed on the Milan Stock Exchange to recover their market value through profits: at the start of 2017, the market capitalisation of the leading companies on the Milan stock exchange analysed by Capital Group was equivalent to 307 billion dollars, but since then total profits have soared well beyond that, reaching 374 billion. To reach the same milestone, companies listed on Wall Street and in Tokyo had to start three years earlier, in 2014; German companies in 2013; French companies in 2012; and British companies as early as 2010.

This is undoubtedly a remarkable achievement, made possible essentially by a combination of factors: the very low level from which Italian valuations started, and the clear ability of our companies to generate profits well above expectations, particularly in the financial sector. With regard to banks in general, the report’s authors speak in no uncertain terms of a ‘renaissance’ and specifically cite the case of UniCredit, which is set to generate, between 2023 and 2025, profits exceeding its initial market capitalisation. Added to this is the similar case of Unipol, which is also capable of repaying its 2023 market value in just three years: demonstrating that, even starting from depressed levels, the quality of profits can rewrite the fortunes of an entire stock market in record time.