Why does Google think SPY and DIA have a PE ratio?

August 26, 2015 7:36 PM

Noticed when I was looking to see what the low was, and saw a PE ratio reported for SPY and DIA (but not QQQ) on Google finance. For SPY, it's currently reporting 9.52, which is surely not the PE ratio of the S&P 500 as a whole. So what gives? I guess you could count dividends as 'earnings' for an ETF, but you're not getting 10% there so what is Google calling earnings here?
posted by PMdixon to Work & Money (11 answers total)

For SPY, it's currently reporting 9.52, which is surely not the PE ratio of the S&P 500 as a whole.

It should be that, but the number seems to be wrong. Perhaps Google just messed up somehow?

SPDR has it as 17.29.
posted by ssg at 7:46 PM on August 26, 2015

Yahoo, for example, has the correct P/E for SPY, though it is as of July 31, so a little different.
posted by ssg at 7:48 PM on August 26, 2015

I don't know the answer for sure, but if the indices are weighted averages, those reports could be the actual PE ratios if the earnings are weighted too. They could also just be miscalculated too. As for the Q's, at first I thought it odd that it does not have a PE listed, but the Q's are made up of more speculative NASDAQ stocks and it might be a negative number.

I don't know about Google, but here is the number for the SPDRS. Call them, they will explain how it is supposed to work. 1-212-656-4440
posted by AugustWest at 7:52 PM on August 26, 2015

The short answer is that different ETP (ETFs, ETNs, etc.) issuers / distributors have different methodolgies, very few of which probably make sense to use alone (or at all) as a basis for investment given the fund / note / trust structures. I know this sounds like a cop-out, but, as a trading professional, I'd urge you to actually read the fund prospectus and understand things like the management fees, pass-through fees, holdings, NAV calculation, rebalances, leverage resets, etc., so you can actually make an informed decision and realize that there is no standard, so you will need to do the work (or ask a licensed advisor).
posted by ExpertWitness at 8:14 PM on August 26, 2015

QQQ has a P/E of 20.30. No idea why Google isn't showing anything for it.
posted by ssg at 8:15 PM on August 26, 2015

Best answer: Google is wrong. Who knows where they are pulling these numbers from. ETFs don't have P/E ratios; they aren't companies. They are traded instruments that attempt to track the performance of an index. Indices, on the other hand, can have P/E ratios.

The Google finance app is a bit of a joke; it's clearly just treating the ETF as if it were a stock, pulling whatever "financials" data it can from somewhere, and blindly calculating a meaningless P/E number. The important thing is that's not the P/E ratio for the S&P. And no, the Nasdaq's P/E is not negative. Basically just ignore the P/E Google tells you for ETFs.
posted by pravit at 8:16 PM on August 26, 2015 [2 favorites]

Best answer: I would be careful with Google Finance in general. It has a nice interface, but I have noticed that it won't even calculate the cost basis and return for GOOG / GOOGL shares acquired prior to the split correctly. If they can't even get that right (and presumably a lot of their employees would be affected), I'm not sure I trust much of their math. It seems to be suffering from the usual Google "benign neglect."
posted by Kadin2048 at 8:17 PM on August 26, 2015 [3 favorites]

Best answer: For example, Google Finance is also calculating meaningless "profit margin" numbers for SPY:
Net profit margin 472.42% 820.47%
Operating margin 95.57% 95.33%
EBITD margin - 95.33%
Return on average assets 10.58% 16.55%
Return on average equity 10.63% 16.63%
CDP Score - -

Just ignore these. It isn't a company. It's an ETF.
posted by pravit at 8:18 PM on August 26, 2015

Best answer: For that kind of financial stuff, you just shrug and say "Yahoo does it better than Google", and then look at yourself out of the corner of your eye for the next hour.
posted by holgate at 8:28 PM on August 26, 2015 [1 favorite]

ETFs don't have P/E ratios; they aren't companies.

Of course ETFs have P/E ratios. It is simply the weighted average of the component company PEs. You have a price you paid for the investment. The investment has earnings. It isn't difficult to compute the PE ratio. Whether the investment is a single company or a thousand companies is irrelevant. It still has a PE ratio.

There can be some minor differences in the reporting of mutual fund PEs. First, some methods ignore negative PE ratios and count them as zero. Some methods use the arithmetic mean and some use the harmonic mean for the calculation. These differences are slight under most circumstances, but the concept of a PE ratio for a mutual fund is well understood.

Google simply has some sort of unexplained bug in its reporting.
posted by JackFlash at 11:33 AM on August 27, 2015

Google Finance is fast but not very accurate. For instance, there are many optionable equities and etfs for which google shows no options. Also, some equities dont even display properly on google. They do not seem to really care as far as I can tell. Yahoo works much better. Unfortunately, google is close enough that I never bother to switch over. GF is far from impressive.
posted by jcworth at 8:11 PM on August 27, 2015