The Casablanca Stock Exchange reached an all-time high of 14,449 points in 2024, marking an impressive rise of +49% since its lows in January 2023. This rapid growth in the space of 20 months raises questions about its sustainability. AGR highlights two major observations.
On the one hand, the rise in stock prices was twice as fast as that of expected profits over the period 2023-2025. This gap between stock market performance and profit growth is much larger than the trend observed over the past decade.
On the other hand, growth stocks, which are generating great enthusiasm, display valuation levels reaching 30 times the estimated profits for 2024. This is a premium of +50% compared to the long-term average. (LT) of the MASI index.
AGR highlights that in a context of high valuations, it is essential to take into account certain risk factors for investment decisions, such as the strength of the withthe sustainability of marginsthe cash generation and the volatility of future profits. Based on stock market experience, stocks with high valuations and less robust fundamentals tend to have two major weaknesses:
1. Limited profitability over long-term investment horizons (generally greater than three years);
2. Greater vulnerability to phases of market slowdown or correction.
Consequently, AGR recommends that investors approach this new stock market phase with a more selective strategy, turning towards securities offering better “valuation” and a more balanced “risk profile”. These are values offering a greater margin of safety, making it easier to withstand a possible market correction.
Facing the strong volatility and current valuations, AGR thus encourages a return to financial fundamentals and to rigorous management risks, in order to maximize long-term returns and better protect against market uncertainties.
