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 ?
"You talk about stocks and cheap money, they're basically corporations, instead of investing in the real economy, can now simply borrow at, you know, close to 0% and buy their own stocks, which yield 2% or 3% on a dividend basis and, you know, provide a return of 6% or 7% on an earnings to price ratio basis."
As for earnings to price ratio, BLOM recorded the highest at 10.9 percent followed by Byblos at 10.8 percent and Audi 7.7 percent.
The earnings to price ratio is the earnings per share divided by the price of the stock 30 trading days prior to the announcement.
Significance of Variables Individual Model Variables Significance Significance Reduction of Free Cash Flow: Free Cash Flow 0.546 -- Debt Ratio 0.145 -- Return on Assets 0.238 -- Market to Book Value 0.996 -- Earnings to Price Ratio 0.128 0.104 Signaling of Management Optimism: Management Ownership 0.821 -- Distribution as Tax Preferred Income: Holding Period Return 0.439 -- Dividend Clientele Effect: Retention Ratio 0.139 0.048 Dividend Yield / Total 0.649 -- Control Variables: Shares repurchased 0.215 0.058 Size of the company 0.580 -- Defensive/ Non-Defensive 0.832 -- Tax Law 1986 Effect 0.390 -- Previous Announcement 0.791 -- ROA/FCF 0.781 --
The final iteration revealed a model in which three independent variables--percentage of shares repurchased (X7), Earnings to Price Ratio (X10), and Retention Ratio (X12)--meet the conditions set forth in the regression model.
The relationship between the earnings to price ratio and excess returns was significant at the 90% level of confidence and between retention ratio and excess returns significant at 95% level of confidence.
TABLE 2 Regression Results for Earnings to Price Ratios on Country/Subperiod Indicators Sub- Coeffi- Signi- Change Country period cient t-statistic ficance Significance Australia 1st .0284 14.13 .001 .001 2nd .0078 4.55 .001 Canada 1st .0034 2.65 .008 .417 2nd .0020 1.61 .107 Germany 1st -.0248 -12.55 .001 .001 2nd .0040 2.84 .005 France 1st .0129 6.03 .001 .001 2nd .0020 1.51 .131 U.K.