Earning Yield
Earning yield basically the reciprocal to P/E ratio and
calculated by dividing Earning per Share by Market price. Earning Yield can be
calculated by this equation: Earning Yield = EPS/ MKT Value
Example of Earning Yield
|
EPS
|
$ 4
|
|
Quoted Price
|
$ 100
|
|
Earning Yield = $ 4/ $ 100 x 100
|
4%
|
|
|
|
Earning Yield and Share Price
Share price
can be calculated with the help of Earning Yield and EPS information. EPS is
divided by earning yield for share price calculation.
|
EPS
|
$ 4
|
|
Earning Yield
|
20%
|
|
Calculate Share Price
|
?
|
|
|
|
Solution
|
EPS
|
$ 4
|
|
Earning Yield
|
20%
|
|
Share Price = ( $ 4/.2)
|
$ 20
|
|
|
|
