high E/P and low E/P opposite, security, indicate

Newhuman

just think back in terms of P/E. Lower P/E stock is undervalued vs. a Higher P/E stock. Since earnings yield is the inverse relationship, High E/P is undervalued and vice versa.

ruchita

whey High E/P indicate a undervalued security and low E/P the opposite? Thanks.

ap0258

well easy way is a high P/E means over priced , so the opposite must be true for E/P.


Intuitively

A high Earnings/Price means that the unit of earnings per unit of price, so if the unit of earnings is higher PER unit of price, that means its a good deal as compared to a stock that a low unit of earnings per unit of price.. its rather simple. think about it like you are getting more earnings for the price you pay.

if you don't understand why a high E/P means undervalued, then i'm pretty sure you don't understand why a P/E means overvalued.

cv4cfa

The earnings yield can be interpreted as earnings return on every dollar spent on the stock.

High earnings yields may be indicative of a bargain (especially if the stock has been battered down by bad news, but nothing has changed fundamentally for the company or the industry)