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	31.7	21.6	5.90	20.8	3.1%	0.97%	25.6	$74.4T	502
Nasdaq 100	40.3	23.8	11.02	27.9	2.5%	0.40%	33.3	$43.9T	100
Dow 30	32.9	24.5	9.42	23.5	3.0%	0.76%	27.7	$25.5T	30
Russell 1000	34.8	14.8	6.32	23.4	2.9%	0.68%	24.7	$61.9T	991
Russell 2000	24.1	19.7	2.30	13.8	4.2%	1.55%	17.7	$3.7T	1937

Sector	P/E	Fwd P/E	EV/EBITDA	Div Yield	Weight	Stocks
Technology	50.0	30.0	37.0	0.35%	56.2%	44
Communication Services	29.9	17.6	21.5	0.31%	25.1%	9
Consumer Cyclical	44.5	19.2	26.4	0.10%	11.7%	11
Healthcare	24.2	25.0	15.7	1.40%	2.3%	10
Consumer Defensive	35.2	24.7	20.9	1.88%	2.0%	7
Industrials	27.9	26.0	18.3	2.02%	1.2%	10
Utilities	23.4	19.7	14.6	2.15%	0.6%	4
Basic Materials	33.2	27.1	19.4	1.24%	0.5%	1
Energy	26.3	12.8	8.7	1.84%	0.3%	2
Financial Services	10.3	10.3	7.2	0.24%	0.1%	1
Real Estate	—	21.7	67.3	0.00%	0.0%	1

#	Ticker	Company	Sector	P/E	Fwd P/E
1	CHTR	Charter Communications, Inc.	Communication Services	2.9	2.5
2	CMCSA	Comcast Corporation	Communication Services	3.8	6.0
3	LULU	Lululemon Athletica Inc.	Consumer Cyclical	7.1	7.2
4	PDD	PDD Holdings Inc.	Consumer Cyclical	8.4	1.2
5	PYPL	PayPal Holdings, Inc.	Financial Services	10.3	10.3
6	AZN	AstraZeneca PLC	Healthcare	12.2	15.5
7	CTSH	Cognizant Technology Solutions Corporation	Technology	13.0	10.3
8	TTD	The Trade Desk, Inc.	Technology	13.3	30.8
9	HON	Honeywell International Inc.	Industrials	14.1	25.0
10	GEHC	GE HealthCare Technologies Inc.	Healthcare	14.4	13.4

#	Ticker	Company	Sector	P/E	Fwd P/E
1	WBD	Warner Bros. Discovery, Inc.	Communication Services	106.7	—
2	MU	Micron Technology, Inc.	Technology	135.6	13.9
3	SHOP	Shopify Inc.	Technology	181.8	90.6
4	AMD	Advanced Micro Devices, Inc.	Technology	229.5	79.6
5	PANW	Palo Alto Networks, Inc.	Technology	261.7	100.0
6	ON	ON Semiconductor Corporation	Technology	267.3	24.2
7	AXON	Axon Enterprise, Inc.	Industrials	280.1	54.9
8	MCHP	Microchip Technology Incorporated	Technology	290.6	48.2
9	PLTR	Palantir Technologies Inc.	Technology	331.8	130.8
10	TSLA	Tesla, Inc.	Consumer Cyclical	354.4	223.4

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