Earnings yield

Earnings yield,

Definition of Earnings yield:

  1. Money managers often compare the earnings yield of a broad market index (such as the S&P 500) to prevailing interest rates, such as the current 10-year Treasury yield. If the earnings yield is less than the rate of the 10-year Treasury yield, stocks may be considered overvalued. If the earnings yield is higher, stocks may be considered undervalued relative to bonds.

  2. The earnings yield refers to the earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of a company's earnings per share. This metric is used by many investment managers to determine optimal asset allocations and is used by investors to determine which assets seem underpriced or overpriced.

  3. Firms earnings per share (EPS) expressed as a percentage of its current share price, used in comparing shares with other shares and shares with bonds. Also called earnings to price ratio, it is the inverse of price to earnings ratio.

How to use Earnings yield in a sentence?

  1. The growth prospects for a company are a critical consideration when using earnings yield. Stocks with high growth potential are typically valued higher and may have a low earnings yield even as their stock price rises.
  2. Earnings yield is one indication of value; a low ratio may indicate an overvalued stock, or a high value may indicate an undervalued stock.
  3. Earnings yield is the inverse of the P/E ratio.
  4. Earnings yield is the 12-month earnings divided by the share price.

Meaning of Earnings yield & Earnings yield Definition