Definition
A P/E of 20 is an earnings yield of 5%. It lets you compare a stock's earnings return with bond yields.
Formula
Earnings yield = EPS / price = 1 / P/E
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Earnings per share divided by price: the inverse of the P/E ratio.
A P/E of 20 is an earnings yield of 5%. It lets you compare a stock's earnings return with bond yields.
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