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 Apr 2025:

Industry Average P/E ratio Number of companies
Advertising Agencies 22.19 23
Aerospace & Defense 25.84 53
Agricultural Inputs 27.53 11
Airlines 14.17 11
Apparel Manufacturing 15.88 16
Apparel Retail 15.02 29
Asset Management 12.53 77
Auto Parts 14.94 45
Auto & Truck Dealerships 16.65 13
Banks - Diversified 14.32 6
Banks - Regional 12.89 294
Beverages - Non-Alcoholic 27.76 12
Biotechnology 26.3 506
Broadcasting 10.81 15
Building Materials 22.23 8
Building Products & Equipment 20.05 29
Business Equipment & Supplies 16.19 7
Capital Markets 16.02 36
Chemicals 15.68 18
Communication Equipment 30.92 43
Computer Hardware 15.21 27
Consulting Services 26.2 17
Credit Services 13.97 45
Department Stores 13.81 5
Diagnostics & Research 30.23 63
Discount Stores 29.16 8
Drug Manufacturers - General 31.76 12
Drug Manufacturers - Specialty & Generic 21.3 44
Education & Training Services 20.38 17
Electrical Equipment & Parts 27.1 40
Electronic Components 27.65 32
Electronics & Computer Distribution 17.33 5
Engineering & Construction 24.24 30
Entertainment 32.99 38
Farm & Heavy Construction Machinery 15.89 21
Farm Products 16.75 15
Food Distribution 25.57 9
Footwear & Accessories 13.25 11
Furnishings, Fixtures & Appliances 15.73 21
Gambling 20.29 11
Gold 25 28
Grocery Stores 22.94 10
Healthcare Plans 21.1 11
Health Information Services 54.91 33
Home Improvement Retail 23.77 7
Household & Personal Products 25.41 25
Industrial Distribution 24.61 17
Information Technology Services 24.94 52
Insurance - Diversified 11.79 12
Insurance - Life 11.25 14
Insurance - Property & Casualty 14.74 37
Insurance - Reinsurance 10.88 8
Insurance - Specialty 12.65 17
Integrated Freight & Logistics 26.22 15
Internet Content & Information 20.9 41
Internet Retail 31.42 25
Leisure 22.02 25
Lodging 21.44 9
Marine Shipping 7.86 24
Medical Care Facilities 22.92 39
Medical Devices 32.94 94
Medical Distribution 26.29 7
Medical Instruments & Supplies 39.48 44
Metal Fabrication 23.81 12
Mortgage Finance 13.07 17
Oil & Gas E&P 14.32 61
Oil & Gas Equipment & Services 18.4 47
Oil & Gas Midstream 15.62 35
Oil & Gas Refining & Marketing 22.49 17
Packaged Foods 23.16 42
Packaging & Containers 19.8 20
Personal Services 22.5 11
Pollution & Treatment Controls 33.77 10
Publishing 31.85 7
Railroads 16.99 8
Real Estate - Development 8.91 10
Real Estate - Diversified 33.36 4
Real Estate Services 31.1 25
Recreational Vehicles 19.18 14
REIT - Diversified 29.73 20
REIT - Healthcare Facilities 37.26 17
REIT - Hotel & Motel 32.91 15
REIT - Industrial 27.28 16
REIT - Mortgage 15.08 39
REIT - Office 53.94 24
REIT - Residential 39.36 18
REIT - Retail 30.56 23
REIT - Specialty 30.98 16
Rental & Leasing Services 15.79 20
Residential Construction 9.17 20
Resorts & Casinos 20.11 17
Restaurants 22.01 43
Scientific & Technical Instruments 31.57 23
Security & Protection Services 18.02 14
Semiconductor Equipment & Materials 24.94 25
Semiconductors 27.59 65
Software - Application 40.12 187
Software - Infrastructure 29.05 95
Solar 28.28 14
Specialty Business Services 24.5 26
Specialty Chemicals 22 44
Specialty Industrial Machinery 25.8 77
Specialty Retail 22.32 38
Staffing & Employment Services 24.66 23
Steel 20.77 14
Telecom Services 28.66 32
Thermal Coal 7.91 8
Tobacco 20.51 5
Tools & Accessories 23.57 10
Travel Services 23.91 11
Trucking 30.77 12
Utilities - Diversified 21.54 15
Utilities - Regulated Electric 21.58 24
Utilities - Regulated Gas 20.53 14
Utilities - Regulated Water 20.44 13

As shown in the table, the Health Information Services industry has the highest average P/E ratio of 54.91, followed by REIT - Office at 53.94. In contrast, the Marine Shipping industry has the lowest average P/E ratio of 7.86, followed by the Thermal Coal industry at 7.91. 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 54.91 33
REIT - Office 53.94 24
Software - Application 40.12 187
Medical Instruments & Supplies 39.48 44
REIT - Residential 39.36 18
REIT - Healthcare Facilities 37.26 17
Pollution & Treatment Controls 33.77 10
Real Estate - Diversified 33.36 4
Entertainment 32.99 38
Medical Devices 32.94 94

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 7.86 24
Thermal Coal 7.91 8
Real Estate - Development 8.91 10
Residential Construction 9.17 20
Broadcasting 10.81 15
Insurance - Reinsurance 10.88 8
Insurance - Life 11.25 14
Insurance - Diversified 11.79 12
Asset Management 12.53 77
Insurance - Specialty 12.65 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.