HOW TO USE THE EARNINGS YIELD WHEN PERFORMING INVESTMENT ANALYSIS

- Links to social media accounts; https://www.instagram.com/matrich_investing/?hl=en https://www.facebook.com/Matrich-Investing-104068614639938/ https://twitter.com/MatrichInvesti1?s=09 WHAT IS THE EARNINGS YIELD ? This is a financial metric that shows the relationship between the EPS and share price of a company. This metric is the inverse of the P/E ratio and it is used to show the returns of profits on the share price Investors who use this type of ratio are the ones that usually consider investment income over capital appreciation of which the capital appreciation is mostly observed with the P/E ratio Stocks with higher earnings yield attract investors because the price for purchasing shares is small and that business is able to make better returns through the profits but stocks with a lower earnings yield are often left out by investors because because the price for purchasing shares is large and that business is making lower returns through profits Other uses of the earnings yield is in helping an investor compare returns of individual shares as well as that of other assets such as bonds in order to figure out which assets have the greatest returns and provide asset allocation CHALLENGES OF USING THE EARNINGS YIELD It doesn’t show a clear picture of the actual amount of money that an investor is going to pocket because out of that profit that has been attained by the business there is some of it that is going to be reinvested into the business and there is some of it that is actually gonna be paid out as dividends One time huge profits could cause the business to record very high earnings yield within the short run than what it normally makes THE FORMULA 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆/𝑺𝒉𝒂𝒓𝒆 𝑷𝒓𝒊𝒄𝒆 𝒙 𝟏𝟎𝟎% #investing #wealth #shares #bonds #income #success #investors #capital #dividends #shareprice #ownership #business #stocks #companies #tanzania

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