Unlock Premium for Just $9.99/Month – Special Launch Offer, Limited Time Only Get Premium

PE ratio by industry

When it comes to analyzing and evaluating stocks, one of the most commonly used metrics is the price-to-earnings (P/E) ratio. The PE ratio helps investors assess a stock's value relative to its earnings. However, the average PE ratio can vary significantly between different industry sectors.

First, let's define the P/E ratio. The P/E ratio is calculated by dividing a company's stock price by its earnings per share (EPS).

Price to Earnings Ratio = Stock Price / TTM Earnings Per Share (EPS)

This ratio shows how much investors are willing to pay for each dollar of earnings the company generates. A high P/E ratio indicates that investors expect strong future growth, while a low P/E ratio suggests investors are less optimistic about the company's future prospects.

Average P/E Ratio by Industry

The average P/E ratio varies significantly by industry. Here is a table showing average PE ratios by industries in the US as of May 2025:

Industry Average P/E ratio Number of companies
Advertising Agencies 15.64 23
Aerospace & Defense 28.19 52
Agricultural Inputs 21.65 11
Airlines 15.28 11
Aluminum 25.52 4
Apparel Manufacturing 16.6 16
Apparel Retail 15.7 29
Asset Management 12.6 77
Auto Parts 15.92 44
Auto & Truck Dealerships 13.21 13
Banks - Diversified 12.51 6
Banks - Regional 13.33 286
Beverages - Non-Alcoholic 26.71 12
Biotechnology 21.74 500
Broadcasting 11.95 14
Building Materials 26.05 8
Building Products & Equipment 23.07 28
Business Equipment & Supplies 20.62 7
Capital Markets 18.19 36
Chemicals 14.25 18
Communication Equipment 21.74 43
Computer Hardware 16.45 25
Consulting Services 26.09 17
Credit Services 13.17 44
Department Stores 9.64 5
Diagnostics & Research 26.99 60
Discount Stores 29.91 8
Drug Manufacturers - General 25.48 12
Drug Manufacturers - Specialty & Generic 26.19 44
Education & Training Services 19.74 17
Electrical Equipment & Parts 27.11 41
Electronic Components 39.9 32
Electronics & Computer Distribution 18.56 6
Engineering & Construction 26.65 30
Entertainment 27.01 38
Farm & Heavy Construction Machinery 21.52 21
Farm Products 17.21 15
Food Distribution 30.24 9
Footwear & Accessories 13.52 11
Furnishings, Fixtures & Appliances 17.01 21
Gambling 16.87 11
Gold 24.14 28
Grocery Stores 21.34 10
Healthcare Plans 16.69 11
Health Information Services 56.14 32
Home Improvement Retail 24.76 7
Household & Personal Products 24.43 26
Industrial Distribution 26.83 17
Information Technology Services 26.54 52
Insurance Brokers 25.61 12
Insurance - Diversified 12.93 12
Insurance - Life 12.87 14
Insurance - Property & Casualty 15.21 37
Insurance - Reinsurance 12.06 8
Insurance - Specialty 12.69 17
Integrated Freight & Logistics 22.62 14
Internet Content & Information 30.01 41
Internet Retail 26.09 25
Leisure 22.43 24
Lodging 22.67 9
Marine Shipping 8.04 24
Medical Care Facilities 21.49 39
Medical Devices 32.48 93
Medical Distribution 24.72 6
Medical Instruments & Supplies 35.04 43
Metal Fabrication 22.05 12
Mortgage Finance 15.33 17
Oil & Gas E&P 12.57 61
Oil & Gas Equipment & Services 16.89 47
Oil & Gas Midstream 14.4 35
Oil & Gas Refining & Marketing 19.8 17
Packaged Foods 22.7 42
Packaging & Containers 23.64 18
Personal Services 24.57 11
Pollution & Treatment Controls 25.12 10
Publishing 27.38 7
Railroads 16.59 8
Real Estate - Development 13.36 10
Real Estate - Diversified 33.67 4
Real Estate Services 31.13 25
Recreational Vehicles 24.75 14
REIT - Diversified 26.92 20
REIT - Healthcare Facilities 33.12 17
REIT - Hotel & Motel 32.79 15
REIT - Industrial 27.96 16
REIT - Mortgage 19.17 39
REIT - Office 44.97 23
REIT - Residential 31.79 18
REIT - Retail 28.5 23
REIT - Specialty 28.91 16
Rental & Leasing Services 17.43 20
Residential Construction 9.45 20
Resorts & Casinos 21.85 17
Restaurants 23.31 43
Scientific & Technical Instruments 31.96 23
Security & Protection Services 17.93 14
Semiconductor Equipment & Materials 28.57 25
Semiconductors 33.09 64
Software - Application 41.7 183
Software - Infrastructure 30.1 94
Solar 28.52 15
Specialty Business Services 26.47 26
Specialty Chemicals 24.74 44
Specialty Industrial Machinery 27.18 77
Specialty Retail 20.28 38
Staffing & Employment Services 24.16 23
Steel 21.44 14
Telecom Services 23.88 32
Thermal Coal 9.9 8
Tobacco 20.91 5
Tools & Accessories 23.36 10
Travel Services 24.98 11
Trucking 27.87 12
Utilities - Diversified 17.94 15
Utilities - Regulated Electric 19.99 24
Utilities - Regulated Gas 18.04 14
Utilities - Regulated Water 20.54 13

As shown in the table, the Health Information Services industry has the highest average P/E ratio of 56.14, followed by REIT - Office at 44.97. In contrast, the Marine Shipping industry has the lowest average P/E ratio of 8.04, followed by the Residential Construction industry at 9.45. This variation is due to several factors, including industry-specific risks, growth potential, and investor sentiment.

Industries with highest PE ratio

Industries with the highest PE ratio are shown in the following chart and table. You can further filter the industries by sector in the chart below, so you can see a breakdown of the top industries with the highest PE ratio for every sector.

Industry Average P/E ratio Number of companies
Health Information Services 56.14 32
REIT - Office 44.97 23
Software - Application 41.7 183
Electronic Components 39.9 32
Medical Instruments & Supplies 35.04 43
Real Estate - Diversified 33.67 4
REIT - Healthcare Facilities 33.12 17
Semiconductors 33.09 64
REIT - Hotel & Motel 32.79 15
Medical Devices 32.48 93

Industries with lowest PE ratio

Industries with the lowest PE ratio are presented in the following chart and table. Within the chart below, you can also refine the industries by sector, allowing you to observe a breakdown of the top industries with the lowest PE ratio in each sector.

Industry Average P/E ratio Number of companies
Marine Shipping 8.04 24
Residential Construction 9.45 20
Department Stores 9.64 5
Thermal Coal 9.9 8
Broadcasting 11.95 14
Insurance - Reinsurance 12.06 8
Banks - Diversified 12.51 6
Oil & Gas E&P 12.57 61
Asset Management 12.6 77
Insurance - Specialty 12.69 17

It's important to compare the P/E ratio of a company to the average P/E ratio for its industry. If a company's P/E ratio is higher than the industry average, it may indicate that investors have high expectations for the company's growth potential. Conversely, if a company's P/E ratio is lower than the industry average, it may suggest that investors are less optimistic about the company's future prospects and therefore are willing to pay lower multiple for it.

Industry Sectors and Characteristics

Some industries tend to have higher P/E ratios than others because they are expected to have higher growth potential and future earnings. On the other hand, industries with lower growth potential or with more mature companies tend to have lower P/E ratios.

There are several industry sectors, each with unique characteristics that impact the P/E ratio. For example:

  • Technology companies often have higher P/E ratios due to the potential for rapid growth and innovation.
  • Healthcare companies often have lower P/E ratios due to regulatory risks and high research and development costs.
  • Consumer goods companies typically have moderate P/E ratios due to the steady demand for their products.

Other factors that can impact P/E ratios include interest rates, inflation, and macroeconomic trends. High interest rates or inflation can reduce the value of future earnings, causing P/E ratios to decline. Economic recessions or other negative macroeconomic events can also impact P/E ratios across industries.

Types of PE ratio

The P/E ratio is a relative comparison between a company's current stock price and its earnings per share (EPS). There are different types of P/E ratios that can be used depending on the timeline of stock price consideration. The first type is the forward P/E ratio, which compares current earnings to future earnings by estimating what the future earnings might look like.

The second type is the trailing twelve months P/E ratio, which uses EPS data from the past 12 months to judge a company's current performance.

The third type is the absolute P/E ratio, which uses current stock price and data from both the past 12 months and future projections.

Lastly, the relative P/E ratio compares the absolute P/E ratio to P/E values of the past, using a time frame set by investors.

It's important to note that while each type of P/E ratio has its own strengths and weaknesses, investors should consider multiple factors beyond P/E ratios when making investment decisions.

Limitations of P/E Ratio

While the P/E ratio is a useful metric, it has some limitations. It's important to note that P/E ratios should not be used as the sole factor when making investment decisions. Investors should consider a range of factors, such as a company's financial health, management team, growth potential, and industry trends, when assessing the value of a company and make more informed investment decisions.