using the aggregated values. Figure 7.3 summarizes the
average P/E ratio, themedian P/E ratio,and the P/E ratio
based on aggregated earnings for three sectors—computer
software, advertising, and aerospace/defense.
FIGURE 7.3Average, Median, and Aggregate Values
NotethatthemedianP/Eratioismuchlowerthantheaverage
P/Eratioforallthreesectors.However,theP/Eratiobasedon
theaggregatevaluesofmarketvalueofequityandnetincome
islowerthantheaverageacrossfirmswhereP/Eratioscould
be computed for software and aerospace companies but
higherforadvertisingcompanies.Thisisbecausethereisa
substantial number of money-losing companies in the
advertising sector, dragging aggregate income down.