Earnings Yield Calculator
Calculates the earnings yield of a stock — the percentage return on each dollar invested based on earnings per share. Use it to compare stocks to bonds or evaluate whether a stock is over- or under-valued.
About this calculator
Earnings yield is the inverse of the price-to-earnings (P/E) ratio and expresses how much a company earns for every dollar you invest in its stock. The formula is: Earnings Yield = (EPS / Stock Price) × 100. For example, if a stock earns $5 per share and trades at $100, the earnings yield is 5%. Investors use this metric to compare equity returns directly against fixed-income alternatives like Treasury bonds — if the earnings yield exceeds the 10-year bond yield, the stock may be relatively attractive. A higher earnings yield generally signals better value, though it must be considered alongside growth prospects, debt levels, and industry context.
How to use
Suppose a company reports earnings per share (EPS) of $4.50 and its stock currently trades at $75.00. Enter $4.50 as EPS and $75.00 as the stock price. The calculator computes: Earnings Yield = (4.50 / 75.00) × 100 = 6.0%. This means for every dollar invested, the company earns 6 cents. If the current 10-year Treasury yield is 4.5%, the stock's 6% earnings yield suggests it may offer better relative value than the risk-free alternative.
Frequently asked questions
What is a good earnings yield for a stock?
A 'good' earnings yield depends on the prevailing interest rate environment. Many investors look for an earnings yield higher than the 10-year government bond yield as a basic hurdle. Historically, an earnings yield above 5–7% has been considered attractive for equities. Always compare within the same industry, since capital-intensive sectors naturally carry different valuation norms.
How is earnings yield different from the P/E ratio?
Earnings yield and the P/E ratio are mathematical inverses of each other. If a stock has a P/E ratio of 20, its earnings yield is 1/20 × 100 = 5%. The P/E ratio tells you how many dollars you pay per dollar of earnings, while earnings yield tells you the percentage return on your investment from earnings. Earnings yield is often preferred when comparing stocks to bonds because both metrics are expressed as percentages.
When should I use earnings yield instead of other valuation metrics?
Earnings yield is most useful when you want to compare the return potential of stocks versus fixed-income investments like bonds. It is also handy for quickly screening a large number of stocks for relative value. However, it relies on reported EPS, which can be distorted by one-time items or accounting choices, so pair it with forward earnings estimates or free cash flow yield for a more complete picture.