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How to Value Thematic Strategies


Head of SPDR Americas Research

Source: Bloomberg Finance L.P. as of December 15, 2020 based on SPDR Americas Research calculations of 145 thematic ETF underlying sector exposures. Characteristics are as of the date indicated.

Weight

                                      P/E

 

10%

80.0

 

50%

20.0

 

40%

10.0

Average

 

36.7

Weighted Average

 

22.0

Weighted Harmonic Average

 

18.5

Metric

Strengths for thematics

Drawback for thematics

Price-to-book

Can be used on companies with negative earnings

Not appropriate for firms with a high level of intangibles

Price-to-earnings

Accounts for cash flow after expenses and what a firm earns that can be paid out to shareholders or retained for growth

Impacted by capital structure, not applicable for firms with negative earnings

Price-to-earnings-growth

Accounts for metrics like P/E, as well as growth expectations

Impacted by capital structure, not applicable for firms with negative earnings

Enterprise value-to-EBITDA

Capital structure agnostic and accounts for cash flow

Not applicable for firms with negative earnings

Price-to-sales

Controls for negative earnings firms

Impacted by capital structure, not applicable for comparison across industries with different margins

Enterprise value-to-sales

Capital structure agnostic and controls for negative earnings firms

Sales not applicable for comparison across industries with different margins

 

Price/Earnings

P/E using FY1 Est

Price/Book

Price/Sales

EV/EBITDA

EV/Sales

S&P 500

27.5

23.8

3.8

2.6

16.0

3.2

S&P 500 Growth

34.9

30.3

7.7

5.1

19.3

4.9

Average Broad Innovation

42.3

37.7

5.9

5.1

19.5

4.0

Difference to S&P 500

54%

59%

54%

95%

22%

23%

Difference to S&P 500 Growth

21%

25%

-24%

-1%

1%

-18%

Footnotes
Disclosures