Earnings Yield - Reading 42 companies, presented, therefore

maratikus

The answer to question 2B on p.558 of Equity CFAI text rates Hand over Somersault. Both have negative earnings, so E/P is used (P/E would be meaningless).
Hand’s earnings were -$2.20 and the price is $22.
Somersault’s earnings were -$1.25 and the price is $10.
Hand’s E/P is therefore -.1; Somersault’s -.125.
The rationale is that Hand has the higher E/P, so it is the better share.
In the absence of any other information, when you are presented with two companies - one losing $2.20 and another losing $1.25 - which would you pick? I would go for the smaller loser.
In fact, I wouldn’t pick, because the information is obviously insufficient.
Negative earnings give meaningless P/Es, but are their E/P’s any more helpful?
Put another way, Hand’s E/P would go from -.1 to -.01 if its price were $100 instead of $10. -.01 is a higher number than -.1, so that would make it a better buy at ten times the price!
What am I missing here? I just don’t get this…