According to yahoo finance, QQQ (a Nasdaq ETF) has a PE ratio of 3.56. Since that is significantly less than the rule of thumb cutoff of 20, I'm not complaining. I'm just wondering two things:

  1. How is the PE ratio for an ETF like QQQ computed? Is it a simple average of each PE ratio? Or are is it a weighted average based on its percentage of the fund?

  2. Given that tech companies tend to have PE ratios of above 20, how can it be so far below 20 for the ETF?

Thank you

  • 3
    $\begingroup$ It's wrong. For example Morningstar reports 20.24 as the P/E for QQQ, which is much more plausible. $\endgroup$
    – Helin
    Jan 8 at 19:38