How the Sector Valuation Map works
Last updated October 22, 2026. Thresholds below are the ones the code uses today.
The Sector Valuation Map groups the large US stocks this site tracks into twelve sectors and compares each with the market on six lenses. A sector is shown as hotter or cooler than the market for each lens, and a median appears only when at least four stocks have a value. A hot tile is a question to investigate, never a verdict.
What are the six lenses?
| Lens | What it measures | Hotter means |
|---|---|---|
| Price per $ of profit | Median P/E of the sector against the median of all tracked stocks | Pricier than the market |
| Cash earned per $ paid | Median free-cash-flow yield (not shown for banks, REITs and utilities) | Less cash per dollar paid |
| Margin of safety | Median gap between price and the site's neutral DCF value (8% growth fading to 2.5%, 10% discount rate, 10 years) | A thinner margin of safety |
| Profit quality | Share of the sector's stocks the earnings quality screen rates strong | Weaker profit quality |
| 3-year price run | Median price change over three years | A bigger run |
| Multiple expansion | Change in the P/E paid for each dollar of profit over three fiscal years (price change ÷ profit-per-share change) | The multiple rose more |
The map colours each tile by how much hotter or cooler the sector is than the market on the chosen lens. The multiple-expansion lens is how a bubble shows up: a rising multiple on flat profits.
How are the twelve sectors defined?
The site's sector file labels each stock with one of 38 narrow industries, several holding only two or three stocks, which is too few for a median to mean anything. These are grouped into twelve: technology, semiconductors (kept apart from the rest of technology), communication services, consumer discretionary and retail, consumer staples, health care, financials, industrials, energy, materials, utilities and real estate. The grouping is a judgement call, made in one file and used by every page that shows sectors. Weights are weights within the tracked set, not the whole market.
Where does the data come from, and what is left out?
Market cap and P/E come from the weekly screener run, price and free cash flow per share from the DCF inputs, profit quality from the earnings quality data and cash returns from the shareholder yield data, all refreshed weekly from SEC filings and market data. Price runs, the price-versus-profit split over three fiscal years and the results in four past crashes come from a separate sector-map file built each week.
Stocks without a sector group are left out, and banks, insurers, REITs and utilities have no cash-yield or margin-of-safety reading because a free-cash-flow model does not fit them.
What are the limits?
The map covers about 500 large US stocks, not the whole market. It shows today's snapshot plus the last few years, not a history of sector valuations, and the crash results use only the companies that survive today. A sector's median hides its biggest names, so the page flags a sector whose three largest stocks make up 55% or more of it. A warm tile asks why the sector is priced that way. It does not say the price is wrong.
Frequently asked questions
Why use medians instead of averages?
A few extreme stocks, such as a company with a tiny profit and a huge P/E, can distort an average. A median shows what a typical stock in the sector looks like, and it is only shown when at least four stocks have a value.
Can one sector be in a bubble while the market looks fine?
Yes. A market-wide number blends cheap and expensive sectors, so it can look calm while one sector's multiple has risen far faster than its profit. Comparing each sector with the market is how the map brings that out.
Why are banks, REITs and utilities missing from some lenses?
Free cash flow means something different for them, so the cash-yield and margin-of-safety lenses are not shown. They still appear on the P/E, profit quality and price lenses where those apply.