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 with 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 == | ||
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* [[Price to earnings ratio]] | * [[Price to earnings ratio]] | ||
[[Category:Corporate_finance]] | [[Category:Corporate_finance]] | ||
Revision as of 08:26, 14 November 2015
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 with 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.
