Vanguard S&P 500 ETF P/E at 27.2, Earnings Yield Trails 4.5% Treasury
VOO•Vanguard S&P 500 ETF trades at a trailing P/E of 27.2, 11% above its five-year average, while its 3.7% earnings yield lags the 4.5% 10-year Treasury yield. Its forward P/E of 20.5 implies 14% aggregate earnings growth driven by top holdings such as Nvidia and Apple.
1. Valuation Premium to Historical Average
The Vanguard S&P 500 ETF currently trades at a trailing P/E ratio of 27.2, about 11% above its five-year average of 24.4 and near the high end of its recent range. This elevated valuation reflects the market’s willingness to pay a premium for exposure to the 500 largest U.S. companies.
2. Forward P/E and Projected Growth
The fund’s forward P/E stands at 20.5, implying consensus earnings growth of roughly 14% over the next year. This outlook is supported by a 51% increase in aggregate EPS for its largest holdings over the past 12 months.
3. Concentration in Top Holdings
The five largest names make up 27.0% of the fund’s assets, led by Nvidia at 7.9% and Apple at 6.5%. Their strong profit expansion disproportionately influences the ETF’s overall valuation and growth expectations.
4. Margin of Safety and Investment Considerations
With an aggregate earnings yield of 3.7% below the 4.5% 10-year Treasury, the ETF offers a thin cushion for error if growth disappoints. Investors seeking a wider risk premium may consider more selective, quality-screened strategies instead of a broad market index.
