How to Find the Price-to-Earnings Ratio of an ETF

By Matt Krantz from Investing Online For Dummies, 7th Edition

Online investors commonly look at the price-to-earnings ratio, or P/E ratio, of an individual stock to find out how expensive it is. The higher the P/E ratio, the more richly valued the stock is. But Exchange Traded Fund (ETF) investors can also use P/E ratios to find how cheap or expensive the stocks held by the ETF are.

Several Web sites provide P/E ratios for ETFs. Using Yahoo! Finance, enter the ETF’s symbol into the search field in the upper-left corner of the page. Click the Get Quotes button. You see the ETF’s P/E ratio listed on the right side of the quote box, next to the label P/E (ttm), which stands for price-to-earnings ratio for the trailing (or last) 12 months.

Yahoo! Finance also provides risk and performance measures for ETFs. The risk measures, such as standard deviation, help you determine how much the ETF will give you indigestion by swinging up and down in value. The performance measures tell you how well the ETF has done. After entering an ETF’s symbol, just click the Performance link on the left side with the blue background to get the ETF’s returns. Click the Risk link on the left side to get the ETF’s risk.

To get the P/E ratio of an ETF from Morningstar, enter the symbol of the ETF you’re interested in and click the Quote button. In the new page that appears, click the Portfolio link at the top of the page under the ETF’s name. There you can find the ETF’s P/E ratio and see how it compares with the relevant benchmark index, such as the Standard & Poor’s 500 index. You can also find lots of other details on the Portfolio page, such as other valuation ratios and which industry sectors the ETF’s holdings fall into.

Because ETFs are priced during the day just like stocks, they can be useful tools to tell you what types of stocks and industries are moving each day. NASDAQ’s ETF center provides in-depth analysis of the ETFs that went up and down the most in value each trading session. It also shows you the most popular ETFs, ranked by trading activity, or volume. The ETF Dynamic Heatmap uses a color-coded grid to show which ETFs are moving the most.