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 22.37 23
Aerospace & Defense 26.07 53
Agricultural Inputs 27.55 11
Airlines 14.52 11
Apparel Manufacturing 15.58 16
Apparel Retail 15.29 29
Asset Management 12.87 77
Auto Parts 15.28 45
Auto & Truck Dealerships 17.22 13
Banks - Diversified 14.53 6
Banks - Regional 13.05 294
Beverages - Non-Alcoholic 27.77 12
Biotechnology 26.73 506
Broadcasting 11.66 15
Building Materials 22.42 8
Building Products & Equipment 20.49 29
Business Equipment & Supplies 21.28 7
Capital Markets 16.81 36
Chemicals 16.45 18
Communication Equipment 31.5 43
Computer Hardware 15.44 27
Consulting Services 26.47 17
Credit Services 14.19 45
Department Stores 14.12 5
Diagnostics & Research 30.71 63
Discount Stores 29.59 8
Drug Manufacturers - General 31.86 12
Drug Manufacturers - Specialty & Generic 21.57 44
Education & Training Services 20.84 17
Electrical Equipment & Parts 27.56 40
Electronic Components 30.97 32
Electronics & Computer Distribution 17.59 5
Engineering & Construction 23.29 30
Entertainment 33.24 38
Farm & Heavy Construction Machinery 16.09 21
Farm Products 16.88 15
Food Distribution 25.8 9
Footwear & Accessories 13.81 11
Furnishings, Fixtures & Appliances 16.09 21
Gambling 20.98 11
Gold 25.28 28
Grocery Stores 23.07 10
Healthcare Plans 21.13 11
Health Information Services 48.69 33
Home Improvement Retail 24.29 7
Household & Personal Products 25.39 25
Industrial Distribution 24.96 17
Information Technology Services 25.36 52
Insurance - Diversified 13.63 12
Insurance - Life 11.44 14
Insurance - Property & Casualty 14.75 37
Insurance - Reinsurance 10.9 8
Insurance - Specialty 12.67 17
Integrated Freight & Logistics 26.47 15
Internet Content & Information 21.05 41
Internet Retail 31.82 25
Leisure 22.64 25
Lodging 21.81 9
Marine Shipping 7.89 24
Medical Care Facilities 22.92 39
Medical Devices 33.47 94
Medical Distribution 26.56 7
Medical Instruments & Supplies 39.89 44
Metal Fabrication 24.33 12
Mortgage Finance 13.18 17
Oil & Gas E&P 13.55 61
Oil & Gas Equipment & Services 18.76 47
Oil & Gas Midstream 15.74 35
Oil & Gas Refining & Marketing 19.41 17
Packaged Foods 23.01 42
Packaging & Containers 19.96 20
Personal Services 22.8 11
Pollution & Treatment Controls 33.12 10
Publishing 31.96 7
Railroads 17.2 8
Real Estate - Development 8.99 10
Real Estate - Diversified 34.03 4
Real Estate Services 31.27 25
Recreational Vehicles 19.46 14
REIT - Diversified 29.87 20
REIT - Healthcare Facilities 37.23 17
REIT - Hotel & Motel 33.05 15
REIT - Industrial 27.32 16
REIT - Mortgage 15.58 39
REIT - Office 54.32 24
REIT - Residential 39.54 18
REIT - Retail 30.76 23
REIT - Specialty 31.22 16
Rental & Leasing Services 16.09 20
Residential Construction 9.31 20
Resorts & Casinos 20.38 17
Restaurants 22.11 43
Scientific & Technical Instruments 32.38 23
Security & Protection Services 18.34 14
Semiconductor Equipment & Materials 25.18 25
Semiconductors 28.83 65
Software - Application 40.76 187
Software - Infrastructure 29.44 95
Solar 28.49 14
Specialty Business Services 23.12 26
Specialty Chemicals 22.22 44
Specialty Industrial Machinery 26.24 77
Specialty Retail 22.79 38
Staffing & Employment Services 24.72 23
Steel 21.06 14
Telecom Services 28.77 32
Thermal Coal 7.81 8
Tobacco 20.35 5
Tools & Accessories 23.93 10
Travel Services 24.27 11
Trucking 31.57 12
Utilities - Diversified 20.57 15
Utilities - Regulated Electric 21.56 24
Utilities - Regulated Gas 20.68 14
Utilities - Regulated Water 20.27 13

As shown in the table, the REIT - Office industry has the highest average P/E ratio of 54.32, followed by Health Information Services at 48.69. In contrast, the Thermal Coal industry has the lowest average P/E ratio of 7.81, followed by the Marine Shipping industry at 7.89. 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
REIT - Office 54.32 24
Health Information Services 48.69 33
Software - Application 40.76 187
Medical Instruments & Supplies 39.89 44
REIT - Residential 39.54 18
REIT - Healthcare Facilities 37.23 17
Real Estate - Diversified 34.03 4
Medical Devices 33.47 94
Entertainment 33.24 38
Pollution & Treatment Controls 33.12 10

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
Thermal Coal 7.81 8
Marine Shipping 7.89 24
Real Estate - Development 8.99 10
Residential Construction 9.31 20
Insurance - Reinsurance 10.9 8
Insurance - Life 11.44 14
Broadcasting 11.66 15
Insurance - Specialty 12.67 17
Asset Management 12.87 77
Banks - Regional 13.05 294

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.