earnings-price ratio

(redirected from Earnings-to-Price Ratio)

Earnings-price ratio

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.
References in periodicals archive ?
We conclude that a model, which incorporates market factor, firm size, book-to-market ratio, earnings-to-price ratio and liquidity, provides a good description of the variation in stock returns compared to the competing models.
2014) investigate the role of earnings-to-price ratio in explaining stock returns in the Brazilian stock market.
It is noteworthy that variables based on different sorting portfolios are used in the descriptive statistics to illustrate the relationship between stock returns and size, book-to-market ratio, earnings-to-price ratio, sales-to-price ratio, dividends-to-price ratio, liquidity factor and momentum.
Using the methodology suggested by Kothari, Sloan (1992), the degree of the relationship between price relatives (one plus the buy-and-hold return) and earnings-to-price ratio (earnings yield) is tested using a quarterly, yearly and intertemporal sample.
it-[tau]] represents the earnings-to-price ratio (earnings yield).
As for the first model, empirical evidence from cross-sectional regression analysis suggest that information provided by earnings-to-price ratios is of some value relevance for explaining market price returns in ASE, i.
Size, earnings-to-price ratio, and forecast consensus capture certain aspects of a firm's information environment (e.
For this purpose, the earnings-to-price ratio was coded as a dichotomous dummy variable based on its sign.
For the bankrupt sample, we find evidence of underreaction to past errors in the 4 years prior to the bankruptcy filing; this underreaction is driven by firms with negative earnings-to-price ratios.
The characteristics of the SEOs that are matched by the characteristic-matched benchmarks are firm size, market-to-book ratio, earnings-to-price ratio, lagged six-month return, and lagged 36-month return.
Basu (1977) shows that high earnings-to-price ratio firms on average earn higher returns than low earnings-to-price firms.
This paper uses earnings-to-price ratios as the market's implicit forecast of future earnings changes.