# Price-to-Earnings Ratio (P/E Ratio) vs Earnings Yield ### Written byTrue Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 14, 2022

## Difference Between P/E Ratio and Earnings Yield

The earnings yield is another valuation metric that is simply the inverse of the P/E ratio (the E/P ratio). If you turn the formula around and divide the EPS number by the stock price and multiply by 100, then you get the earnings yield percentage.

## EPS Formula: For example, a company with a stock price of \$20 and an EPS of \$1 has a PE ratio of 20 (\$20 / \$1) and an earnings yield of 5% ((\$1 / \$20) * 100).

## When to Use P/E Ratio

If you want to compare the "yield" of different investments, then this may be a more useful number than the PE ratio. For example, you may see that a savings account yields 2%, while a stock you like has an earnings yield of 5% with earnings that are growing each year. Comparing the yields can give you a good idea of which one is a better long-term investment, although you should keep in mind that stocks are also much riskier than a savings account. 