Sector Valuations

by: Bespoke Investment Group

It's been a while since we posted the trailing 12-month P/E ratios for the ten S&P 500 sectors, and some interesting trends have emerged. As shown below (click to enlarge), the S&P 500's trailing 12-month P/E currently stands at 15.16.

Four sectors have P/Es that are lower than 15.16 -- Energy, Health Care, Utilities, and Financials. After having a negative P/E ratio during the collapse, the Financial sector now has the lowest valuation of all sectors at 13.42.

The Telecom sector has the highest P/E at 18.85, and surprisingly, the Consumer Staples sector has a higher P/E ratio than the Technology sector.

Below is a chart (click to enlarge) showing the change in P/E ratios for the ten S&P 500 sectors since the end of 2009. A lower P/E ratio means that earnings have risen faster than price for the sector over this time frame, while an expanding P/E ratio means price has risen faster than earnings.

As shown, P/E ratios have dropped the most for Materials and Financials. Technology and Energy are the other two sectors that have seen pretty significant drops in their P/Es. And the four sectors that have seen the biggest expansion in their P/E ratios since the end of 2009 are all defensive in nature. Telecom has seen its P/E expand by 3.46, followed by Consumer Staples (1.33), Health Care (0.56), and Utilities (0.38).