Negative earnings render P/E rations meaningless. So the books say to use earnings yield, E/P. This may be the dumbest question of all time, but what the heck is the difference? The reciprocal is still negative. What am I missing.
not really first of all the meaning of the ratio does not exist for negative earnings then secondly the ‘scale’ of measurement changes when earnings are negative
So is it just so you can compare to other firms with negative or postive EPS?
if p/e is time to recover investment from earnings what would a pe of -1 mean?
florinpop Wrote: ------------------------------------------------------- > if p/e is time to recover investment from earnings > what would a pe of -1 mean? You figured out the time machine?
exactly lol
earnings yield (EPS/P) basically gives you the amount of earnings (positive or negative) that you are buying with each unit of stock price. Still meaningful for comparisons with other companies when earnings negative, zero, or close to zero
Great. Makes sense. Thanks.