Earnings yield is the inverse of P/E — the return earned per dollar invested.
What it is
Earnings yield is earnings per share divided by share price, expressed as a percentage. It is simply the P/E ratio flipped upside down. It frames a stock's profitability as a percentage return, which makes it easy to compare against bond yields.
Why it matters
It lets investors line up a stock's earnings power directly against the yield on bonds or cash, a common way to judge whether stocks are attractive versus fixed income. Pitfalls: like P/E it is distorted by one-off items and is not meaningful when earnings are negative, and it ignores growth and cash conversion.
How it's calculated
Divide earnings per share by the current share price and multiply by 100, which is the same as dividing 1 by the P/E ratio.
How Quintarthai uses it
P/E and the underlying earnings are shown in the Summary Key-metrics grid and Ratios tab of a stock's company page, from which the earnings yield is simply the inverse.
Cross-border note. Because it is built from EPS, earnings yield carries the same IFRS-versus-US-GAAP comparability caveat as the P/E ratio when comparing Canadian and US issuers.
FAQ
How does earnings yield relate to the P/E ratio?
It is the exact reciprocal; a P/E of 20 corresponds to an earnings yield of 5% (1 divided by 20).
Why compare earnings yield to bond yields?
Both are expressed as percentages, so the comparison gives a rough sense of whether stocks offer a better return for the risk than fixed income.
Check your understanding
A stock has a P/E ratio of 25. What is its earnings yield, and why is that figure useful?
Earnings yield is the reciprocal of P/E (1 / 25 = 4%), and because it is a percentage it can be lined up against bond or cash yields to judge whether stocks are attractive versus fixed income.