Earnings Yield: Simple Valuation Lens for Investors
Earnings yield explained (E/P): how it relates to P/E, how investors use it to compare stocks, and why it works best as a cross-check.
What is earnings yield?
Earnings yield is earnings divided by price (E/P). It is the inverse of the P/E ratio and can be interpreted like an “earnings return” before growth.
How investors use it
- Compare stocks within the same sector
- Use as a quick sanity check vs bonds/rates
- Combine with quality and leverage metrics
Earnings yield can mislead when earnings are cyclical or distorted. Use fundamental analysis and intrinsic value as a cross-check.
Screen for valuation + quality
Filter by valuation metrics and business quality together to avoid value traps.
FAQs
Is earnings yield better than P/E?▼
They are the same information in different form. Earnings yield can be easier to compare to interest rates.
What is a “good” earnings yield?▼
It depends on growth and risk. Compare to peers and history rather than using a universal threshold.
Related
Intrinsic Investor is for education and research only. Not financial advice.