What is the yield?

Revenue yield is a measuring ratio that is often used by investment managers or investors on the stock market to evaluate the value of specific shares. The yield of the yield is equal to the yield of the Company in the share divided by the current price of the shares. In this context, the term “profit on the share” simply refers to the amount of new profits that can be attributed to every outstanding share of the company's ordinary shares. Profit per share is usually calculated on the basis of the value of the shares during the last twelve -month period.

also referred to as the ratio of profit prices, revenue ratio is shortened as E/P and is usually expressed as a percentage. For example, if the company's profit per share over the last twelve months equals $ 5 (USD) and the stock price is $ 50, the E/P ratio is 50/5. Expressed as a percentage, revenue for revenues for the shares of this company equals 10%. Applicated inventory measurement ratio: price ratio to earnings (P/E). The ratio of P/E is equivalent to the current price of shares divided by its profit per share. Some evaluatorsThe market prefers the use of the E/P ratio, because unlike the ratio of P/E, it is expressed as a percentage. This can facilitate comparison of shares with revenue on other types of investment, such as bonds or money market tools.

When using the E/P ratings, investment managers are considering whether the Company's shares show a high earnings return or a low earnings return. In general, a high yield suggests that the supply is underestimated, while a low yield may indicate an overvalued supply. This rule is not absolute and financial evaluators must also take into account other factors.

One of the factors that need to be considered when reviewing the yield is to return shares for future periods. The ratio of E/P is looked at the shares for a one -time, and subsequently does not take into account the actual value of the shares for the future period. Potential stock growth must also be counted. Some stocks mayTo aim minimal earnings, although they have strong growth potential. As a result, although these shares may not be overvalued, they may indicate low earnings.

Investment managers can generally seek how the income in earnings concerns the predominant interest rates. This is done by considering the yield of the return of the wide market index against the predominant interest rates. If the income from the yield is lower, the shares may be considered overvalued compared to bonds.