earnings-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 ?
The basic assumption in this analysis is that the earnings-price ratio is a reasonable estimate of the forward-looking real return on equities, (13) where this is defined as the expected total return per share (dividends plus capital gains) corrected for movements in the general price level.
The conditions under which the prospective return on equity equals the earnings-price ratio are neither obvious nor obviously correct.
Variant 1 is the earnings-price ratio for the S&P 500 using quarterly earnings.
In all cases, the stock price used in calculating the earnings-price ratio was lagged by three months from the date of the financial year end.
313 between interest cover and the earnings-price ratio.
Furthermore, the coefficient for the earnings-price ratio is no longer significant and, contrary to expectations, has a positive sign.
The earnings-price ratio is commonly used as a measure of the real rate of return on equity.
Book-to-market and the earnings-price ratio predict returns during the shorter 1963-97 sample.
The ten-year average earnings-price ratio (EP) is used as the empirical proxy for the firm's growth opportunities.
18) When the firm experiences a temporary decline in earning that is close to zero or negative, price-earnings ratio could give distorted results, whereas earnings-price ratio is more robust to the possible distortion.
Earnings-price ratios based on prices at end of quarter.
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).