Earnings Yield vs Earnings Per Share: Difference and Comparison

Both the terms earnings yield and earnings per share can be assumed to be the same as they both refer to the profit or gain made by the investor.

Key Takeaways

  1. Earnings yield is the ratio of earnings per share to the stock price, while earnings per share is the total earnings divided by the number of outstanding shares.
  2. Earnings yield measures how much a company earns relative to its stock price, while earnings per share measures how much each share earns.
  3. Earnings yield can be used to compare the attractiveness of different stocks, while earnings per share can be used to compare the profitability of different companies.

Earnings Yield vs Earnings Per Share

Earnings yield is a financial term that helps an investor understand how much profit they gain from every unit of currency invested in a company’s stock. Earnings per share is a term used to calculate the benefit received by an investor based on each share they have invested, and the value is from the company.

Earnings Yield vs Earnings Per Share

Earnings Yield is a very basic financial term that is important to understand. It basically helps the investor to understand how much profit he or she gains with every unit of currency invested in the stock of a company.

Earnings per share is the calculation of the benefit received by the investor in each share he or she has invested in. This value is from the company’s point of view rather than that of the investor.

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Comparison Table

Parameters of ComparisonEarnings YieldEarnings Per Share
Requirement The quantity of earnings per share is required in order to calculate this. It does not have the requirement of Earning Yield in order to be calculated.
Calculated byIt is mostly calculated by investors. It is mostly calculated by companies or organizations.
Helps InIt helps to determine if a particular stock is in a state of being sold or bought.It helps to estimate the benefit of the company with every share owned.
TaxIt includes taxes.It does not include taxes.
IndicatesIt helps to indicate whether a stock is undervalued or overvalued.It helps to determine the profit or benefit of the company.

What is Earnings Yield?

The term Earnings Yield is also used as the earning price ratio. It is basically a ratio between the benefit earned per share divided by the latest price of the share in the market.

This quantity helps the investor recognize the amount of earning each unit of currency (e.g. 1 dollar) brings to him. It can be calculated in terms of percentage by multiplying the ratio by a hundred. 

Its inverse is represented by PE, which is a ratio calculated by inverting the numerator and denominator of the earnings yield calculation.

The current or latest earning yield of a particular stock may rise or fall depending upon its demand in the market or the decision of the company people.

The increased value of the earning yield indicates the perfect time to buy a particular stock, whereas it is lowering (that is, overvalued stock) indicates the perfect time for its sale.

earnings yield

What is Earnings Per Share?

It is calculated by including the profit and the dividends and excluding the tax to be paid divided by the number of basic or ordinary shares. It also acts as a numerator in order to calculate the earnings yield for the investor.

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The higher value of the term indicates the number of investments by the investors, as the main criteria for investment is determined by estimating the amount of profit an organization is getting from each of its shares.

The higher the term value, the more the number of investors, as all investors look for profit, and earning per share is an important criterion for the decision relating to the investment.

earnings per share

Main Differences Between Earnings Yield and Earnings Per Share

  1. Both of these terms have different methods of calculation.
  2. Earnings yield indicates the investor’s profit, whereas earning per share determines that of the company being invested in.
Difference Between X and Y 2023 05 19T222140.440
References
  1. https://www.sciencedirect.com/science/article/pii/0304405X83900314
  2. https://www.jstor.org/stable/2490543

Last Updated : 25 August, 2023

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10 thoughts on “Earnings Yield vs Earnings Per Share: Difference and Comparison”

  1. I think it’s quite interesting how the two terms are used to measure different aspects of a company’s financial situation. This could be very useful for investors.

    Reply
  2. This is indeed a very technical article and lays out the key differences with clarity. It needs to be shared more widely as it can guide investors to make better choices.

    Reply
    • Yes, the distinctions made here are crucial for anyone wishing to engage in stock market investments. The clarity of the delineation between the two terms is particularly valuable.

      Reply
  3. This article is very informative and should help out a lot of people who want to get into investing. It should clear up any confusion about earnings yield and earnings per share.

    Reply
  4. I’m sorry, but I found this post a bit confusing. It looks like the terms are used interchangeably, but then they are not the same. The difference is pretty subtle, and I’m not sure if I really get it.

    Reply
  5. I seriously doubt that any of this really matters to your average investor. The terms can be confusing, and most people would rather listen to an investment advisor than trying to figure this all out.

    Reply
  6. This is a very instructive text, very helpful to understand these financial terms. I have no doubt that this will be useful.

    Reply
    • You are right, it’s good to know that we can use these terms to compare the attractiveness of different stocks and companies’ profitability. It’s a good reference for investors.

      Reply
  7. It’s fascinating to learn about these two terms and how they can impact investment decisions. This definitely gives investors more tools to make informed decisions.

    Reply
  8. The way this post explains the difference between earnings yield and earnings per share is quite clear. The comparison table is very useful to understand the individual functions of both accounting measures.

    Reply

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