Investors frequently use earnings yield as an important for estimating the worth of a stock. GuruFocus has developed a new Valuations feature that automatically calculates key metrics such as earnings yield for every stock in gurus’ portfolios – gurus such as George Soros. Soros, one of the best money managers of all time, gave up investing outsider investors’ money in 2011, but still manages his own family fortune. His extensive portfolio contains a smattering of high-earnings-yield stocks, but the ones he has are quite robust.
Earnings yield is defined as the earnings per share for the trailing 12 months, divided by the current share price, i.e., the inverse of the P/E ratio. A slightly different ratio developed by investor Joel Greenblatt, and the one GuruFocus uses, is EBIT divided by enterprise value.
The modified ratio more accurately depicts the company’s profitability relative to its stock price because items like interest payment, tax, etc., do not directly factor into the company’s operational profitability. Moreover, enterprise value shows the real price stock and bond investors pay or the buyout price for the company, as opposed to the share price.
“So we're just sort of leveling the playing field for companies that take on debt and companies that don't,” Greenblatt explained in an interview with Steve Forbes. “But when you buy a share of stock, what you're really doing is paying for the equity, but you're also assuming the debt that the company took on. So we're taking that into account. But really, all we're doing is comparing the earnings of a company to the price that we're paying.”
Earnings yield is also important because it tells how well the company has done in the last 12 months making a return on the money shareholders invested.
According to GuruFocus’ new Valuation feature, Soros’ stocks with the highest earnings yield include:
HollyFrontier, for instance, has an earnings yield of 31.6%, the highest of all of George Soros stocks. This means that for every $1 the company is worth, it is creating 31.6 cents. A quick survey shows it is doing this better than most of its competitors. Its top competitor Valero Energy (VLO) has an earnings yield of 24.2%, and Tesoro Corp. (TSO) has an earnings yield of 20.7%.
Investors can also use the earnings yield to measure the attractiveness of a stocks versus bonds. Currently, the 10-year Treasury bond is yielding 1.64%, far less than HollyFrontier.
One limitation of earnings yield is it only looks back and sheds no light on the future of the company. For that, a formula like the forward rate of return is preferable.
See George Soros’ stock portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of George Soros.
Earnings yield is defined as the earnings per share for the trailing 12 months, divided by the current share price, i.e., the inverse of the P/E ratio. A slightly different ratio developed by investor Joel Greenblatt, and the one GuruFocus uses, is EBIT divided by enterprise value.
The modified ratio more accurately depicts the company’s profitability relative to its stock price because items like interest payment, tax, etc., do not directly factor into the company’s operational profitability. Moreover, enterprise value shows the real price stock and bond investors pay or the buyout price for the company, as opposed to the share price.
“So we're just sort of leveling the playing field for companies that take on debt and companies that don't,” Greenblatt explained in an interview with Steve Forbes. “But when you buy a share of stock, what you're really doing is paying for the equity, but you're also assuming the debt that the company took on. So we're taking that into account. But really, all we're doing is comparing the earnings of a company to the price that we're paying.”
Earnings yield is also important because it tells how well the company has done in the last 12 months making a return on the money shareholders invested.
According to GuruFocus’ new Valuation feature, Soros’ stocks with the highest earnings yield include:
| HollyFrontier Corp. (HFC, Financial) | 31.60% |
| Valero Energy Corp. (VLO, Financial) | 24.20% |
| Chevron Corp. (CVX, Financial) | 23.60% |
| JPMorgan Chase & Co. (JPM, Financial) | 20.80% |
| Tesoro Corp. (TSO, Financial) | 20.70% |
| DISH Network Corp. (DISH, Financial) | 19.60% |
| General Electric Company (GE, Financial) | 16.90% |
| Macy’s Inc. (M, Financial) | 11.20% |
| SunTrust Banks Inc. (STI, Financial) | 10.70% |
| Acacia Research Corp. (ACTG, Financial) | 4.70% |
Investors can also use the earnings yield to measure the attractiveness of a stocks versus bonds. Currently, the 10-year Treasury bond is yielding 1.64%, far less than HollyFrontier.
One limitation of earnings yield is it only looks back and sheds no light on the future of the company. For that, a formula like the forward rate of return is preferable.
See George Soros’ stock portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of George Soros.
