Earnings yield valuation

Earnings yield is earnings divided by equity price or value, so it is the reciprocal of a consistently defined P/E ratio. Valuation therefore equals maintainable earnings divided by the selected yield. Use comparable earnings definitions and consider risk, growth, marketability and unusual items. The earnings yield is not the dividend yield: retained earnings belong in earnings even when not distributed. It is also not necessarily the same as the cost of equity, because growth and distribution assumptions affect their relationship.