Earnings yield: Difference between revisions
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The earnings per share divided by the market price, expressed as a percentage. | The earnings per share divided by the market price, expressed as a percentage. | ||
The reciprocal of the earnings yield is the price/earnings ratio. | |||
<span style="color:#4B0082">'''Example 1'''</span> | |||
GeeCo's share price is 200p. | |||
Its relevant earnings per share for the earnings yield calculation are 12p. | |||
The earnings yield on this basis is: | |||
12 / 200 | |||
= 6% | |||
'''Relationship between earnings yield and price/earnings ratio''' | |||
The reciprocal of the earnings yield is the price/earnings ratio (PER). | |||
<span style="color:#4B0082">'''Example 2'''</span> | |||
GeeCo's share price is 200p. | |||
Its relevant earnings per share (EPS) for earnings yield calculation are 12p. | |||
GeeCo's earnings yield is 6% (= 0.06) | |||
The PER on this basis is the reciprocal of the earnings yield: | |||
1 / 0.06 | |||
= 16.7 | |||
''The PER can also be calculated directly from the share price and EPS as: 200/12 = 16.7.'' | |||
== See also == | == See also == | ||
* [[Dividend yield]] | * [[Dividend yield]] | ||
* [[Earnings]] | |||
* [[Market price]] | * [[Market price]] | ||
* [[Price to earnings ratio]] | * [[Price to earnings ratio]] | ||
* [[Reciprocal]] | |||
* [[Total shareholder return]] | |||
* [[Yield]] | |||
[[Category:Corporate_finance]] | |||
Latest revision as of 02:05, 15 July 2021
The earnings per share divided by the market price, expressed as a percentage.
Example 1
GeeCo's share price is 200p.
Its relevant earnings per share for the earnings yield calculation are 12p.
The earnings yield on this basis is:
12 / 200
= 6%
Relationship between earnings yield and price/earnings ratio
The reciprocal of the earnings yield is the price/earnings ratio (PER).
Example 2
GeeCo's share price is 200p.
Its relevant earnings per share (EPS) for earnings yield calculation are 12p.
GeeCo's earnings yield is 6% (= 0.06)
The PER on this basis is the reciprocal of the earnings yield:
1 / 0.06
= 16.7
The PER can also be calculated directly from the share price and EPS as: 200/12 = 16.7.
