The

earnings yield of a

company can be calculated
by dividing the

earnings per share (

EPS)
by the current

market price of the

share.

The result can be multiplied by 100 to make a

percentage,
which can then be compared to

interest rates and yields
of other

investments. Earnings yield is the inverse
of the

Price to earnings ratio (

PER).

For

example, suppose company XYZ has a market price of
210 cents per share, and

earnings per share of 15 cents
per

share, the earnings yield would be:

EY = EPS / PRICE
= 15 / 210
= 0.0714
= 7.14%

A higher earnings yield is better,

ceteris paribus.