Learn / Fundamentals / Valuation / Earnings Yield
Earnings Yield = EPS ÷ Share Price
This number tells you what percent of today's profit you buy for each dollar of stock price. It is the flip of P/E, spoken as a return instead of a multiple.
01 Feel it first
Drag share price and EPS. Watch earnings yield update live, see the equivalent P/E, and compare your yield to a simple 4% bond-like reference.
02 Break the intuition
A 40× P/E sounds scary. Peel the cards to see which company offers the fatter earnings claim on each dollar you pay.
03 Build the formula
Tap the chips. Earnings per share is the profit belonging to one share. Divide by price to get the earnings yield.
$2 of earnings on a $40 share is a 5% earnings yield. That is the same stock as a 20× P/E, just flipped into a percent return.
04 Scrub the scale
Drag the earnings yield slider across the bands. A higher percent means you are buying more of today's profit for each dollar of price.
At 5.0% earnings yield you sit in the Moderate band. Above 6% often means a cheaper multiple. Below 3% usually means the market is paying up for growth.
05 Two flavors
Last year's profit per share versus what analysts expect next year.
06 The catch
Mature cash cows often carry higher yields. Fast growers often trade on thin yields because tomorrow's profit is expected to be much larger.
07 Check yourself
08 Where it breaks
EPS can look fine while free cash flow lags. Pair earnings yield with FCF yield before you treat the percent as spendable return.
A big write-down or asset sale can spike or crush trailing EPS. A single year's yield is a snapshot, not a permanent rate.
Negative EPS gives a negative or meaningless yield, just like P/E breaks on unprofitable companies.
A thin yield can still be fair if profits are expected to double. The percent only prices today's earnings, not tomorrow's story.
Open any ticker for earnings yield, P/E, and history, then screen for value by percent return, not just a multiple.
At 5.0%, you are buying more earnings per dollar than a simple 4% bond-like return. That is the flip of a 20.0× P/E. A solid yield band. Easier to compare with other percent returns than a raw P/E multiple.