earnings-price ratio

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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 ?
Imagine if earnings yields must catch up with interest rates, the market should trade at 12 times Price-to-Earnings (P/E) ratio, which means share prices must fall by at least another 20 percent from the current level.
Rating constraints include a limited operating history as a business development company (BDC), weaker-than-peer earnings yields, a fully secured funding profile, higher-than-average non-cash income, weaker relative earnings coverage of the dividend, and the potential that CCT will be unable to access the equity markets for capital following the completion of its current issuing authority in 2016, barring a liquidity event.
In any event, earnings growth, P/E ratios, dividend yields and earnings yields all signal catch-up potential for the Vienna Stock Exchange.
Bond-equity earnings yields ratios are, with the exception of the post Lehman phase, historically low.
First, low short interest rates and bond yields have encouraged cheap borrowing and enabled private equity specialists to leverage themselves up and to purchase companies on valuations that exploit the difference between money market yields and earnings yields.
investors require much higher earnings yields (relative to the benchmark ten-year Treasury yield) than before.
For instance, if one were valuing private equity one would not have past earnings yields to provide an expected earnings yield.
In Table 3a, the vector-error-correction model involving the earnings yields (E_P), the inverse of the price-earnings ratio, and inflation (PDOT) is shown.
This study examines whether earnings yields and inflation premiums are incorporated into long-term stock returns using the data set provided by Renshaw [1997].
To summarize, the Rolph-Shen study shows that, over the past 30 years, a very low spread between earnings yields and short-term interest rates has generally signaled poor stock market performance during the subsequent month.
"Earnings Yields, Market Values, and Stock Returns," Journal of Finance, 44: 135-148.
Disappointingly the writer in this chapter does not relate the use of P/Es to earnings yields, their reciprocals.