Formula
Earnings Yield =
Operating Income /
Enterprise ValueNew Peoples Bankshares Inc earning_yield_greenblatt Calculation
* All numbers are in millions except for per share dataNew Peoples Bankshares Inc Annual Data
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New Peoples Bankshares Inc Quarterly Data
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Explanation
Joel Greenblatt defines the earnings yield using the above equation because it more accurately reflects the companys profitability relative to its stock price. Items like interest payment and tax etc. are not directly related to the companys operational profitability.
Enterprise Value instead of market cap (share price) is used in the calculation because it is the real price stock and bond investors together pay for the company.
Beaware
Joel Greenblatts definition of earnings yield has the same problems the regular earnings yield does. It does not consider the growth of the company. It only looks at one-years business operation. For cyclical companies, the earnings yield is usually highest at the peak of the business cycle. But these earnings are rarely sustainable.
Forward Rate of Return based on Don Yacktmans definition is a better measure of the expected rate of return for a stock.
Related Terms
Operating Income,
Enterprise Value,
Earnings Yield,
Forward Rate of Return* All numbers are in millions except for per share dataNew Peoples Bankshares Inc Annual Data
| Dec05 | Dec06 | Dec07 | Dec09 | Dec10 | Dec11 | Dec12 |
|---|
| earning_yield_greenblatt |
|---|
New Peoples Bankshares Inc Quarterly Data
| Dec10 | Mar11 | Jun11 | Sep11 | Dec11 | Mar12 | Jun12 | Sep12 | Dec12 | Mar13 |
|---|
| earning_yield_greenblatt |
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European Shorting
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