Earnings yield

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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.


See also