Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Cooking Sectorial P/E Valuation

Recently a SA article of RoseNose ("To Win The Investing Gambling Game Know The Cards And Terms Needed To Play") brought to my attention the sectorial P/E, and the importance to take it in consideration in the due diligence. I thought this was a valid point and decided to study it and look for a reliable source to add it to my selection process.

First point was where to find that reliable source? At the time, I didn't know so I decided to calculate it by myself.

I collected P/E and sectors from Morningstar and prepared 2 sets of tables:

SET 1: For 504 stocks of the S&P 500 index

SET 2: For all 6,713 stocks.

I classified each set by Sectors and Financial grade. This double check would help to validate the process and provide additional information.

Once I did it and obtained the results, RoseNose also came up with a web source for S&P500 P/E by sectors: GuruFocus ( http://www.gurufocus.com/sector_shiller_pe.php ), and it became evident that there was discrepancies with data shown in RoseNose's initial article, data provided in that site webs, and my own calculations.

If I wanted that my calculations became in line with published information I had to:

  1. Remove companies with zero P/E (or just not showing P/E) and
  2. Remove those whose P/E was above a certain level (P/E>75).

It follows the tables I created by compiling the above data and information. If you study them I am sure you will arrive to several interesting conclusions and practical information to help your investing.

For example, the importance of considering financial grade on top P/E metrics. Let's assume you study purchasing a S&P500 company, let's call it XXX, in Consumer Cyclical, with a P/E of 17.0. As mean value for S&P500 in that sector is 20.4, you think it is a good choice. But it may not be if that company has a financial grade of C. S&P500 in Consumer Cyclical with financial C have a P/E of 15.0. Conclussion XXX may not be a good choice.

Is S&P500 Sectorial P/E "cooked"?. What do I need to look at? Does it make sense that worse financial companies to have a P/E lower? How can I use all this P/E information? Is it worthy?....

SET 1a: Sectorial P/E study for S&P500

 

"Raw" Price/Earnings

"0" >Price/Earnings

"Cooked" Price/Earnings

S&P500

All<>0

# Stocks

Earnings>0

# Stocks

>0& <75

# Stocks

Basic Materials

29.76

21

34.72

18

25.57

17

Consumer Cyclical

52.29

84

53.56

82

20.41

79

Financial Services

15.45

67

15.92

65

15.92

65

Real Estate

66.79

25

69.57

24

35.85

20

Consumer Defensive

32.72

40

33.56

39

29.30

38

Energy

28.90

38

73.20

15

28.27

12

Healthcare

37.39

57

40.99

52

27.37

48

Utilities

20.88

28

23.39

25

23.39

25

Communication Services

58.49

10

64.99

9

26.13

7

Industrials

22.73

75

23.03

74

23.03

74

Technology

28.12

59

31.30

53

26.81

51

S&P 500

33.32

504

36.83

456

23.86

436

Financial Grade A

           

Basic Materials

24.99

6

24.99

6

24.99

6

Consumer Cyclical

24.72

20

24.72

20

24.72

20

Financial Services

20.13

9

20.13

9

20.13

9

Real Estate

41.58

8

41.58

8

41.58

8

Consumer Defensive

32.13

23

32.13

23

32.13

23

Energy

0.00

0

0.00

0

0.00

0

Healthcare

38.43

19

38.43

19

32.65

17

Utilities

21.63

12

21.63

12

21.63

12

Communication Services

52.38

3

52.38

3

40.77

2

Industrials

22.55

32

22.55

32

22.55

32

Technology

28.19

25

29.37

24

29.37

24

Financial Grade B

           

Basic Materials

25.20

9

28.35

8

28.35

8

Consumer Cyclical

30.64

32

30.64

32

22.25

31

Financial Services

20.35

12

20.35

12

20.35

12

Real Estate

85.22

15

91.31

14

32.56

10

Consumer Defensive

34.88

14

34.88

14

22.52

13

Energy

31.24

8

62.48

4

34.23

3

Healthcare

37.75

30

41.94

27

25.55

26

Utilities

19.01

11

23.23

9

23.23

9

Communication Services

22.32

3

22.32

3

22.32

3

Industrials

24.53

27

24.53

27

24.53

27

Technology

27.82

21

30.74

19

27.68

18

Financial Grade C

           

Basic Materials

58.71

4

78.27

3

22.28

2

Consumer Cyclical

16.04

30

17.18

28

15.03

27

Financial Services

13.04

35

13.83

33

13.83

33

Real Estate

29.40

2

29.40

2

29.40

2

Consumer Defensive

40.77

2

40.77

2

40.77

2

Energy

30.90

26

89.27

9

27.41

7

Healthcare

34.14

7

47.79

5

16.14

4

Utilities

23.23

5

29.03

4

29.03

4

Communication Services

120.28

3

120.28

3

17.20

2

Industrials

20.03

16

21.36

15

21.36

15

Technology

30.28

12

40.38

9

19.74

8

Financial Grade D

           

Basic Materials

6.74

2

13.48

1

13.48

1

Consumer Cyclical

1218.10

2

1218.10

2

22.47

1

Financial Services

13.93

11

13.93

11

13.93

11

Real Estate

0.00

0

0.00

0

0.00

0

Consumer Defensive

0.00

1

0.00

0

0.00

0

Energy

11.18

4

22.35

2

22.35

2

Healthcare

29.89

1

29.89

1

29.89

1

Utilities

0.00

0

0.00

0

0.00

0

Communication Services

0.00

1

0.00

0

0.00

0

Industrials

0.00

0

0.00

0

0.00

0

Technology

6.42

1

6.42

1

6.42

1

Financial Grade F

           

Basic Materials

0.00

0

0.00

0

0.00

0

Consumer Cyclical

0.00

0

0.00

0

0.00

0

Financial Services

0.00

0

0.00

0

0.00

0

Real Estate

0.00

0

0.00

0

0.00

0

Consumer Defensive

0.00

0

0.00

0

0.00

0

Energy

0.00

0

0.00

0

0.00

0

Healthcare

0.00

0

0.00

0

0.00

0

Utilities

0.00

0

0.00

0

0.00

0

Communication Services

0.00

0

0.00

0

0.00

0

Industrials

0.00

0

0.00

0

0.00

0

Technology

0.00

0

0.00

0

0.00

0

SET 1b: Sectorial P/E study for S&P500 (weighted by Market Capital)

 

Price/Earnings Weighted

Price/Earnings Weighted

Price/Earnings Weighted

S&P500

All <>0

# of Stocks

Earnings>0

# of Stocks

>0& <75

# of Stocks

Basic Materials

32.62

2769.55

34.65

2606.9

26.44

2421.12

Consumer Cyclical

21.27

577.58

22.37

549.04

22.37

549.04

Financial Services

37.55

787.99

37.84

782

19.69

709.68

Real Estate

25.18

2103.81

25.31

2092.75

25.31

2092.75

Consumer Defensive

30.36

3805.91

31.39

3680.77

28.26

3608.85

Energy

35.54

19577.83

37.31

18649.7

24.54

17531.97

Healthcare

           

Utilities

25.28

163.27

25.28

163.27

25.28

163.27

Communication Services

23.73

908.3

23.73

908.3

23.73

908.3

Industrials

20.62

751.23

20.62

751.23

20.62

751.23

Technology

39.35

209.79

39.35

209.79

39.35

209.79

S&P 500 W

29.84

1373.64

29.84

1373.64

29.84

1373.64

Financial Grade A

0.00

0.00

0.00

0.00

0.00

0.00

Basic Materials

36.21

1250.95

36.21

1250.95

31.12

1116.48

Consumer Cyclical

21.44

272.98

21.44

272.98

21.44

272.98

Financial Services

27.78

296.5

27.78

296.5

22.02

264.63

Real Estate

21.45

866.9

21.45

866.9

21.45

866.9

Consumer Defensive

31.95

2199.84

32.76

2145.3

32.76

2145.3

Energy

           

Healthcare

23.34

211.44

24.08

204.98

24.08

204.98

Utilities

116.10

965.3

116.10

965.3

23.97

632.01

Communication Services

19.09

292.19

19.09

292.19

19.09

292.19

Industrials

70.09

304.17

74.09

287.74

32.50

230.92

Technology

42.44

770.44

42.44

770.44

18.77

667.3

Financial Grade B

54.19

854.55

64.61

716.63

34.50

525.2

Basic Materials

29.71

1302.01

31.04

1246.38

22.73

1223.12

Consumer Cyclical

20.53

233.57

22.88

209.56

22.88

209.56

Financial Services

18.79

179.31

18.79

179.31

18.79

179.31

Real Estate

23.69

738.81

23.69

738.81

23.69

738.81

Consumer Defensive

21.89

1413.38

22.66

1365.56

22.18

1355.34

Energy

           

Healthcare

71.16

62.29

89.21

49.69

27.12

30.78

Utilities

14.26

362.06

14.81

348.84

12.99

338.71

Communication Services

12.26

1321.05

12.88

1258.02

12.88

1258.02

Industrials

29.78

19.49

29.78

19.49

29.78

19.49

Technology

42.18

43.07

42.18

43.07

42.18

43.07

Financial Grade C

53.27

444.06

185.81

127.32

21.67

63.37

Basic Materials

29.30

205.17

61.25

98.15

15.98

70.1

Consumer Cyclical

23.02

71.03

24.59

66.5

24.59

66.5

Financial Services

58.74

306.19

58.74

306.19

17.99

265.74

Real Estate

33.87

498.1

34.64

487.04

34.64

487.04

Consumer Defensive

83.23

170.25

96.09

147.47

17.39

85.77

Energy

           

Healthcare

4.33

20.56

13.48

6.61

13.48

6.61

Utilities

1855.16

13.1

1855.16

13.1

22.47

3.06

Communication Services

12.41

400.65

12.41

400.65

12.41

400.65

Industrials

0.00

0

0.00

0

0.00

0

Technology

0.00

6.17

0.00

0

0.00

0

Financial Grade D

14.51

36.17

18.79

27.94

18.79

27.94

Basic Materials

29.89

11.42

29.89

11.42

29.89

11.42

Consumer Cyclical

0.00

0

0.00

0

0.00

0

Financial Services

0.00

5.99

0.00

0

0.00

0

Real Estate

0.00

0

0.00

0

0.00

0

Consumer Defensive

6.42

22.44

6.42

22.44

6.42

22.44

Energy

           

Healthcare

0.00

0

0.00

0

0.00

0

Utilities

0.00

0

0.00

0

0.00

0

Communication Services

0.00

0

0.00

0

0.00

0

Industrials

0.00

0

0.00

0

0.00

0

Technology

0.00

0

0.00

0

0.00

0

Financial Grade F

0.00

0

0.00

0

0.00

0

Basic Materials

0.00

0

0.00

0

0.00

0

Consumer Cyclical

0.00

0

0.00

0

0.00

0

Financial Services

0.00

0

0.00

0

0.00

0

Real Estate

0.00

0

0.00

0

0.00

0

Consumer Defensive

0.00

0

0.00

0

0.00

0

Energy

0.00

0

0.00

0

0.00

0

Healthcare

0.00

0

0.00

0

0.00

0

Utilities

0.00

0

0.00

0

0.00

0

Communication Services

0.00

0

0.00

0

0.00

0

Industrials

0.00

0

0.00

0

0.00

0

Technology

0.00

0

0.00

0

0.00

0

SET 2: Sectorial P/E study for all 6,713 stocks.

 

"Raw" Price/Earnings

">0" Price/Earnings

"Cooked" Price/Earnings

All Stock companies

ALL

# of Stocks

Earnings>0

# of Stocks

>0& <75

# of Stocks

Basic Materials

-0.13

827

43.10

226

18.98

208

Consumer Cyclical

26.58

776

81.24

492

21.25

472

Financial Services

24.17

636

43.38

536

17.08

521

Real Estate

15.35

364

66.59

251

25.70

209

Consumer Defensive

7.91

453

37.89

311

24.15

289

Energy

21.20

640

96.07

194

18.15

178

Healthcare

1.45

832

49.44

249

27.77

216

Utilities

23.80

207

49.61

150

18.00

143

Communication Services

16.09

189

39.15

125

22.06

115

Industrials

-31.63

895

38.08

503

20.58

482

Technology

9.22

894

62.24

391

24.72

334

All Stocks

7.11

6713

54.91

3428

21.39

3167

Financial Grade A

           

Basic Materials

10.96

64

29.80

34

26.87

33

Consumer Cyclical

1.30

90

26.44

85

25.40

84

Financial Services

5.66

41

19.37

35

19.37

35

Real Estate

41.65

70

56.95

64

30.44

55

Consumer Defensive

13.59

76

30.61

74

27.31

72

Energy

22.64

19

29.12

16

16.25

15

Healthcare

24.36

104

40.96

76

31.52

67

Utilities

17.54

30

18.32

29

18.32

29

Communication Services

-21.79

19

26.69

15

26.69

15

Industrials

12.03

131

24.57

121

23.94

120

Technology

41.54

139

54.08

126

28.99

106

Financial Grade B

           

Basic Materials

10.73

197

68.14

91

23.59

83

Consumer Cyclical

24.00

197

34.83

183

23.77

176

Financial Services

111.71

112

122.95

104

17.07

98

Real Estate

-13.73

109

53.35

87

25.71

70

Consumer Defensive

19.72

91

32.21

77

25.18

72

Energy

11.31

76

29.86

48

21.36

44

Healthcare

7.43

192

54.02

102

30.41

90

Utilities

9.58

68

33.21

60

19.65

59

Communication Services

40.09

32

49.65

29

20.90

27

Industrials

33.99

196

62.52

173

23.39

161

Technology

34.64

197

100.07

121

26.14

103

Financial Grade C

           

Basic Materials

-1.53

194

26.49

52

15.08

47

Consumer Cyclical

10.38

196

20.57

155

18.39

152

Financial Services

18.55

192

21.55

177

17.44

174

Real Estate

32.48

87

64.01

66

25.30

54

Consumer Defensive

29.39

159

46.93

121

22.67

111

Energy

60.64

194

187.52

77

21.11

67

Healthcare

0.29

196

69.25

37

27.69

29

Utilities

6.70

49

28.46

34

18.97

31

Communication Services

16.45

88

32.89

62

24.23

57

Industrials

-9.09

194

22.41

126

19.35

122

Technology

-11.99

187

32.57

90

22.30

80

Financial Grade D

           

Basic Materials

-3.38

192

18.67

33

9.17

32

Consumer Cyclical

-52.45

158

44.39

51

14.45

47

Financial Services

5.43

197

16.57

177

16.17

176

Real Estate

55.49

59

146.59

27

16.93

24

Consumer Defensive

-52.19

62

34.98

29

23.47

27

Energy

4.56

181

50.96

43

12.50

42

Healthcare

-4.02

197

45.80

24

15.89

20

Utilities

9.60

34

24.93

21

10.67

19

Communication Services

19.52

32

67.93

13

14.62

11

Industrials

-34.51

195

25.33

60

13.28

58

Technology

-4.74

187

33.87

40

17.35

35

Financial Grade F

           

Basic Materials

-11.00

180

33.40

16

7.78

13

Consumer Cyclical

163.21

135

1438.73

18

18.43

13

Financial Services

-21.32

94

70.67

43

17.60

38

Real Estate

-49.54

39

35.18

7

20.71

6

Consumer Defensive

-10.43

65

34.53

10

7.25

7

Energy

-1.85

170

10.74

10

10.74

10

Healthcare

-14.11

143

2.75

10

2.75

10

Utilities

119.04

26

571.08

6

18.62

5

Communication Services

5.52

18

21.73

6

6.08

5

Industrials

-156.73

179

44.52

23

7.10

21

Technology

-6.64

184

80.42

14

10.07

10

SET 3: Sectorial list at GuruFocus

 

S&P500 sectorial list at GuruFocus

S&P500

Shiller P/E

Regular P/E

# of stocks

Basic Materials

24.4

33.5

22

Consumer Cyclical

25.4

20.4

83

Financial Services

19

12

67

Real Estate

57

33.9

24

Consumer Defensive

24

25

40

Energy

13.8

-20.4

38

Healthcare

29.1

23.6

56

Utilities

23.8

28.8

29

Communication Services

30.1

16.9

10

Industrials

21.8

19.4

75

Technology

26.9

20.6

61

S&P 500

25.9

23.9

500

Note1: Data was collected at close on June 17th, 2016

Note2: Web sites used:

Additional disclosure: In this article, I share my thoughts with SA readers with the intention to initiate some discussion. Please, do not make any investment decision based in the data I show. Future evolution of stock used in the example or similar ones can make results quite different. Make your own due diligence and take decisions accordingly.