The earnings yield ratio is an effective restatement of the price-earnings ratio. It shows earnings per share as a percentage of the market value of the ordinary share.
Earnings yield is calculated by dividing the earnings per share (EPS) for the last 12 months by the current market value of the share and multiplying the result by 100.
If a company has an earnings per share (EPS) ratio of 2.8 and its shares trade at $56 per share, the earnings yield ratio is (2.8/56) × 100 = 5%.
The earnings yield ratio is 5%. This means that the company’s EPS during the last 12 months was 5% of the current market value of its ordinary shares.