Earnings yield

A year's earnings as a share of the price: the P/E turned upside down

In detail

Earnings yield is earnings per share divided by the share price, times 100, which makes it the inverse of the P/E ratio. Because it expresses a year's profit as a percentage of the price, it is used to set stocks side by side with bond yields or deposit rates. Unlike the dividend yield, it includes the profit the company keeps rather than paying out.

Example

With a share price of $2,000 and EPS of $100, the earnings yield is 5%. That says the same thing as a P/E of 20.

Related terms

P/E ratio EPS Dividend yield Yield to maturity

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