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The S&P 500^® Revenue-Weighted Index assigns company weights based on revenue rather than market capitalization. By anchoring weights to revenue, the index may help reduce concentration risk, limit weights in higher-valued stocks and increase representation of companies that generate more sales. In this blog, we review the index’s performance characteristics, valuation metrics and diversification profile.

Year-to-Date and Long-Term Outperformance

Year-to-date, the S&P 500 Revenue-Weighted Index has outperformed the S&P 500^® by 2.18% and by 1.57% over the past year (see Exhibit 1). Over the long term, including back-tested performance, the index has also delivered strong results, with annualized performance of 11.92% and slightly lower volatility than The 500^®.

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Lower Valuations Relative to the S&P 500

Revenue-weighted indices have historically exhibited lower price multiples than market-cap-weighted indices, which naturally allocate the largest weights to stocks with the highest share price appreciation. As shown in Exhibits 2 and 3, the S&P 500 Revenue-Weighted Index’s price-to-earnings (P/E) and price-to-sales (P/S) ratios relative to The 500 currently stand at 0.75 and 0.25, respectively—well below their historical averages of 0.83 and 0.41, respectively. This reflects the index’s reduced weight in the most highly valued stocks and its increased weight in companies with large, established revenue bases.

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Lower Weight in Magnificent 7 Stocks

As illustrated in Exhibit 4, the S&P 500 Revenue-Weighted Index assigns lower weights to each of the Magnificent 7 stocks compared to The 500. Overall, the index’s total weight in these stocks is 22.3% lower than that of The 500, further reducing concentration risk.

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Sector Weight Comparison

As shown in Exhibit 5, Health Care (20.83%) and Financials (15.31%) currently represent the largest sector weights in the S&P 500 Revenue-Weighted Index, corresponding to overweights of 11.06% and 2.25%, respectively. In contrast, Information Technology is the most underweighted sector, with an 11.77% weight—22.81% below its weight in The 500. Overall, the S&P 500 Revenue-Weighted Index currently offers a more balanced sector distribution compared to The 500.

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Conclusion

The S&P 500 Revenue-Weighted Index represents an alternative to traditional market-cap weighted benchmarks by prioritizing companies with strong top-line performance. By emphasizing sales, this approach aims to better reflect fundamental company strength, while offering reduced concentration risk and lower weight in higher-valued stocks.

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