Question 1

What is the P/E ratio of the S&P 500?

Accepted Answer

The S&P 500 P/E ratio is the aggregate price-to-earnings ratio calculated by dividing the total market capitalisation of all S&P 500 companies by their combined trailing-twelve-month net income. It measures how much investors are paying per dollar of earnings across the index. The historical average is roughly 15-17x.

Question 2

What is the difference between trailing P/E and forward P/E?

Accepted Answer

Trailing P/E uses earnings from the past 12 months (actual reported results). Forward P/E uses consensus analyst earnings estimates for the next 12 months. Forward P/E is typically lower because analysts expect earnings to grow. A large gap between trailing and forward suggests strong expected growth.

Question 3

What is earnings yield?

Accepted Answer

Earnings yield is the inverse of P/E (i.e., 1 / P/E). It expresses how much earnings you get per dollar invested. For example, a P/E of 25 equals a 4% earnings yield. Investors compare earnings yield to risk-free Treasury yields to gauge whether stocks offer adequate compensation over bonds.

Question 4

How is the aggregate P/E calculated?

Accepted Answer

We use the market-cap-weighted method: total market cap of all index members divided by total positive net income (TTM). Loss-making companies contribute zero to the denominator, which is the standard institutional approach used by S&P Global.

Question 5

Why are some sector P/E ratios very high?

Accepted Answer

Sectors with many growth stocks (Technology, Consumer Discretionary) or heavy depreciation (Real Estate/REITs) tend to have elevated P/E ratios. This doesn't necessarily mean overvaluation — forward P/E and EV/EBITDA often give a more balanced picture for these sectors.

Question 6

Is a high P/E ratio bad?

Accepted Answer

Not necessarily. A high P/E can reflect strong expected growth (justified by forward earnings), a low-risk industry premium, or genuine overvaluation. Compare trailing P/E with forward P/E: if forward P/E is significantly lower, earnings are expected to grow, which may justify the current premium.

Index	P/E	Fwd P/E	P/B	EV/EBITDA	Earn. Yield	Div. Yield	Median P/E	Mkt Cap	Stocks
S&P 500	30.9	21.0	5.75	20.3	3.2%	0.99%	27.0	$72.6T	502
Nasdaq 100	38.0	22.5	10.40	26.4	2.6%	0.43%	34.3	$41.4T	100
Dow 30	32.6	24.1	9.33	23.3	3.1%	0.76%	29.1	$25.3T	30
Russell 1000	33.2	14.1	6.04	22.4	3.0%	0.71%	25.1	$59.1T	991
Russell 2000	24.1	20.0	2.24	13.3	4.2%	1.54%	17.6	$3.7T	1937

Sector	P/E	Fwd P/E	EV/EBITDA	Div Yield	Weight	Stocks
Technology	38.2	27.6	29.3	0.38%	59.2%	6
Consumer Cyclical	31.3	19.6	18.1	0.44%	12.7%	4
Financial Services	21.2	16.7	21.2	1.29%	8.8%	5
Consumer Defensive	34.4	32.3	23.0	1.51%	6.8%	3
Healthcare	25.1	25.0	17.5	2.07%	6.4%	4
Industrials	34.0	31.3	27.2	1.14%	2.5%	4
Energy	35.2	13.3	13.6	2.95%	1.8%	1
Communication Services	13.2	11.6	9.0	3.42%	1.5%	2
Basic Materials	32.8	27.9	21.5	0.94%	0.3%	1

#	Ticker	Company	Sector	P/E	Fwd P/E
1	VZ	Verizon Communications Inc.	Communication Services	11.0	8.9
2	TRV	The Travelers Companies, Inc.	Financial Services	14.5	11.0
3	HON	Honeywell International Inc.	Industrials	15.0	26.4
4	DIS	The Walt Disney Company	Communication Services	16.4	16.3
5	JPM	JPMorgan Chase & Co.	Financial Services	16.5	13.4
6	GS	The Goldman Sachs Group, Inc.	Financial Services	17.1	12.3
7	NKE	NIKE, Inc.	Consumer Cyclical	17.8	29.4
8	MRK	Merck & Co., Inc.	Healthcare	20.0	54.8
9	AXP	American Express Company	Financial Services	20.4	17.8
10	MCD	McDonald's Corporation	Consumer Cyclical	20.8	19.3

#	Ticker	Company	Sector	P/E	Fwd P/E
1	CSCO	Cisco Systems, Inc.	Technology	32.0	24.9
2	SHW	The Sherwin-Williams Company	Basic Materials	32.8	27.9
3	AMZN	Amazon.com, Inc.	Consumer Cyclical	34.6	19.3
4	CVX	Chevron Corporation	Energy	35.2	13.3
5	CAT	Caterpillar Inc.	Industrials	36.5	25.1
6	V	Visa Inc.	Financial Services	40.0	30.8
7	NVDA	NVIDIA Corporation	Technology	43.1	22.7
8	WMT	Walmart Inc.	Consumer Defensive	43.9	41.5
9	AAPL	Apple Inc.	Technology	46.6	39.4
10	BA	The Boeing Company	Industrials	75.9	—

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