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Sunday, August 28, 2011

How to Calculate Earnings Yield

Earnings yield is a company's earnings per share divided by the current market price per share. It is the reciprocal of the price to earnings ratio. The higher the earnings yield the more undervalued a stock is.

Learn how to calculate the earnings yield with the following examples:

Example 1:
If a stock currently has a P/E ratio of 5, it would have an earnings yield of: 1/5 = 20%

Example 2:

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