What Is a Good P/E Ratio? It Depends on the Sector
There is no single good P/E ratio, because what a fair price for earnings is depends on how fast they grow. As of October 2026 the median stock this site tracks trades at 24.6 times its trailing earnings, but sector medians run from 13.3 for financials to 45.2 for semiconductors. Compare a stock with its own sector and growth, not with one cutoff.
What is the P/E ratio?
The price-to-earnings (P/E) ratio is a stock's price divided by its earnings per share over the last 12 months. A $100 stock that earned $5 a share trades at 20 times earnings, which is the same as an earnings yield of 5%. See P/E ratio in the glossary.
| Version | Earnings used | Good for | Watch out for |
|---|---|---|---|
| Trailing P/E | The last 12 months, reported | A fact, not a forecast | Looks backward, and one-off items distort it |
| Forward P/E | Analysts' estimate for the next 12 months | What the market expects | Estimates are optimistic more often than not |
| CAPE (Shiller) | 10-year average, inflation-adjusted | Smoothing out the business cycle | Says little about the next year. See what the CAPE is |
What is the average P/E ratio?
Across the 293 large US stocks this site tracks, the median trailing P/E is 24.6 and the market-cap-weighted figure (total value divided by total earnings of profitable companies) is 24.9. Published S&P 500 figures differ by provider and by how they treat losses, so compare like with like.
The market-wide number hides large differences:
| Sector | Stocks | Median P/E | Against the market median |
|---|---|---|---|
| Semiconductors | 16 | 45.2× | +84% |
| Technology | 32 | 34.1× | +39% |
| Health Care | 40 | 32.7× | +33% |
| Materials | 7 | 31.4× | +28% |
| Real Estate | 18 | 30.4× | +24% |
| Consumer Staples | 21 | 28.4× | +15% |
| Industrials | 49 | 27.7× | +13% |
| Consumer Discretionary & Retail | 33 | 21.4× | −13% |
| Utilities | 8 | 20.9× | −15% |
| Energy | 13 | 18.5× | −25% |
| Communication Services | 12 | 16.8× | −32% |
| Financials | 44 | 13.3× | −46% |
Median trailing P/E by sector. Purple is above the market median, green below. Source: this site's Sector Valuation Map, weekly data.
Is a low P/E ratio good?
Not by itself. A low P/E can mean a bargain-priced business or a business whose earnings are about to fall. Financials trade near 13.3 partly because banks and insurers grow more slowly and carry leverage that investors discount. A P/E of 8 on earnings that fall 30% next year is really 11.
That is the value trap problem, and it is why a P/E should be checked against the quality of the earnings. Read how to check if a stock is a value trap.
How do you judge whether a P/E is high?
- Against its sector: a P/E of 30 is ordinary for technology (the sector median is 34.1) and rich for energy (18.5).
- Against its growth: divide the P/E by the growth rate to get the PEG. About 1 reads as fair, and the screener passes a stock only under 1.5. See how this site computes PEG.
- Against its history: the market's CAPE median since 1871 is 16.1, and it is about 40 today, a level reached only around 2000. A high P/E is easier to defend when earnings are growing fast and interest rates are low.
The Sector Valuation Map puts every sector's P/E, cash yield and margin of safety side by side.
P/E ratio FAQ
What is a good P/E ratio for a stock?
There is no universal number. Compare the P/E with the stock's sector median, its earnings growth and its own history. A P/E that looks high for a utility can be ordinary for a software company.
Is a P/E of 20 good?
It is below the median of 24.6 for the stocks this site tracks, which is about average for large US stocks, and it implies a 5% earnings yield. Whether it is good depends on how fast the earnings grow and how reliable they are.
What does a negative P/E mean?
The company lost money over the last 12 months, so the ratio is not meaningful. This site leaves loss-makers out of P/E medians and shows the share of a sector's stocks without a P/E separately.
Should I use the trailing or the forward P/E?
Both. Trailing P/E is a fact and forward P/E is the market's expectation. A forward P/E far below the trailing one assumes earnings will jump, so check how reliable the estimates have been.
Why do technology stocks have higher P/Es?
Investors pay more per dollar of current earnings for companies expected to grow them faster, and many tech companies reinvest heavily. The PEG ratio adjusts a P/E for that growth.