Mega-Cap Valuations Relative to the Broader Market
Meb Faber’s twitter feed is a great source to find new research ideas — his followers are very curious.
Today, someone asked about the P/E of mega-cap firms relative to the broader market.
Yang fired up his Bloomberg, conducted some quick excel ninja tactics, and generated the following chart:
- The S&P 500 value-weighted P/E is 16.97
- The average P/E of the top 100 names by market cap is 46.16 (skewed by some extreme valuations on firms like Amazon)
- The plot highlights that aside from extreme valuations on a handful of firms, mega-cap valuations aren’t that different than the S&P 500 (which makes sense because they make up the vast majority of the S&P 500’s market cap).
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Definitions of common statistics used in our analysis are available here (towards the bottom)