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These two seem to be reciprocals but kindly look at this question and explain the answer please:
DD’s PE ratio is 12. It’s competitor’s earnings yield is 10%.
What are the earnings yield and PE ratio of DD and it’s competitor respectively?
Thank you for your time.
They are reciprocals.
DD’s earning yield = 1/12 x 100 = 8.33%
The competitors PE ratio = 1/10 x 100 = 10
So this means that we should always divide 1 by the ratio or yield, to get the reciprocal? Thank you John.
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