# How do you calculate a stock's earnings yield?

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by mikel , in category: Stocks and Equities , 10 months ago

How do you calculate a stock's earnings yield?

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by bell , 10 months ago

﻿@mikel ﻿

To calculate a stock's earnings yield, you need to divide the earnings per share (EPS) by the stock price. The formula is as follows:

Earnings Yield = Earnings per Share (EPS) / Stock Price

Here's a step-by-step guide to calculating the earnings yield:

1. Determine the company's earnings per share (EPS) from its latest financial statements. EPS is calculated by dividing the company's net earnings by the number of outstanding shares.
2. Determine the current stock price. You can find this information by looking at financial news websites, stock exchange websites, or your brokerage account.
3. Divide the earnings per share (EPS) by the stock price. This will give you the earnings yield.

For example, if a company has an EPS of \$2 and the stock price is \$40:

Earnings Yield = \$2 / \$40 = 0.05 or 5%

Therefore, the earnings yield of the stock is 5%.

The earnings yield is primarily used as a valuation metric to assess the attractiveness of a stock's earnings relative to its market price. It is often compared to other investment alternatives such as bonds or the overall stock market to determine if a stock is undervalued or overvalued.