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Earnings-Price Ratio

   Also found in: Wikipedia 0.01 sec.
Earnings-price ratio
See: Earnings yield
Earnings-Price Ratio
The annual earnings of a security per share at a given time divided into its price per share. It is the inverse of the more common price-earnings ratio. Often, the earnings one uses are trailing 12-month earnings, but some analysts use other forms. The earnings-price ratio is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. It is also a measure of expected, but not realized, growth. It may be used in place of the price-earnings ratio if, say, there are no earnings (as one cannot divide by zero). It is also called the earnings yield or the earnings capitalization ratio.
earnings-price ratio (E/P ratio)
A measure indicating the rate at which investors will capitalize a firm's expected earnings in the coming period. This ratio is calculated by dividing the projected earnings per share by the current market price of the stock. A relatively low E/P ratio anticipates higher-than-average growth in earnings. Earnings-price ratio is the inverse of the price-earnings ratio. Also called earnings capitalization rate, earnings yield.
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Earnings-price ratios based on prices at end of quarter.
Common stock prices and yields by Economic Indicators
Economists have suggested a whole range of variables that predict the equity premium: dividend price ratios, dividend yields, earnings-price ratios, dividend payout ratios, corporate or net issuing ratios, book-market ratios, beta premia, interest rates (in various guises), and consumption-based macroeconomic ratios (cay).
Asset Pricing by NBER Reporter
For a sample of New Zealand firms, Berkman and Bradbury (1996) find little or no support for the underinvestment hypothesis when using either an earnings-price ratio or asset growth/cash flow variable to capture a firm's investment opportunity set.
The underinvestment problem and corporate derivatives use by Gay, Gerald D.; Nam, Jouahn / Financial Management
 
 
 
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