According to NYU's Stern School of Business, as of January 2018, using trailing 12-month data, the average price-to-earnings (P/E) ratio of the retail sector is 46.30. The P/E is commonly used in fundamental analysis as a valuation metric. Fundamental investors use it to determine whether a company's stock price is appropriate in relation to the earnings per share (EPS) generated by the company.
Breaking Down the Average P/E Ratio of the Retail Sector
The P/E ratio is calculated by dividing a company's market price per share by its EPS. NYU's Stern School publishes P/E data for different industries, and the retail sector is divided into seven categories, which include automotive, building supply, distributors, general, grocery and food, online, and specialty lines retail companies.
As of January 2018, based on trailing-12-month data, the data of the P/E ratios of these companies combine all retail companies, with an average trailing P/E of 46.30. This value ranges from a low of 16.09, which is the average of automotive retail companies to a high of 111.56, which is the average of retail distributor companies.
Building supply retail companies have an average P/E ratio of 34.85, general retail companies have an average of 21.02, grocery and food retail companies have an average of 40.72, online retail companies have an average of 64.87, and specialty lines retail companies have an average P/E ratio of 34.98.
The average P/E ratio of the retail sector is calculated using the arithmetic mean average. The retail sector's P/E ratio is calculated as (16.09 + 34.85 + 111.56 + 21.02 + 40.72 + 64.87 + 34.98) / 7. This average includes large-cap stocks, such as Walmart, Costco Wholesale Corporation, Dollar Tree Incorporated and Home Depot.