Choose the earnings yield formula before setting a cutoff
EPS / price measures profit attributable to each share after interest and tax. EBIT / EV compares profit before interest and tax with the value assigned to the business. Neither percentage is a dividend payout or an expected stock return. Use the same accounting basis and period for every company within each ranking.
- An illustrative equity-yield cutoff of at least 8% corresponds to 0 < P/E ≤ 12.5 when earnings are positive. A filter that only says P/E ≤ 12.5 can accidentally admit negative multiples.
- An earnings-yield minus bond-yield spread is a valuation comparison, not a complete estimate of the equity risk premium. Growth, reinvestment, payout, inflation and risk differ; no universal spread establishes a bargain.
| Measure | Calculation | Screening constraint |
|---|
| Equity earnings yield | Diluted EPS TTM / price × 100 | Positive price; keep reported and adjusted EPS separate. |
| P/E conversion | 100 / P/E gives yield in percent | Use the same EPS basis. A positive P/E of 12.5 means 8%; a missing P/E cannot be inverted. |
| Enterprise earnings yield | EBIT TTM / EV × 100 | Require positive EV for ordinary ranking. EBIT is different from EBITDA and cash flow. |
| Dividend yield | Annual dividends per share / price × 100 | Measures distributions, which can differ substantially from accounting profit. |
Recalculate two companies and watch the ranking reverse
These are fictional manufacturers, not market quotes. Amounts are USD millions except price and EPS. Both use TTM earnings ending June 30, 2026, published August 10, and a September 30, 2026 price snapshot. Assume no preferred stock, noncontrolling interests, leases or other EV adjustments. The worksheet uses current outstanding common shares for market capitalization and subtracts cash and cash equivalents.
- A ranks higher on diluted EPS / price; B ranks higher on EBIT / EV. Applying one cutoff to both ratios would mix different claims on profit and capital.
- TradingView documents an EV formula using diluted common shares, preferred stock, debt, minority interest, and cash plus short-term investments. It need not match this simplified worksheet. If its diluted-share input for A were 110 million and the other adjustments were zero, EV would be 7,000 and EBIT / EV would be 11.43%. The EPS weighted-average share count is not automatically the correct EV share input.
- Check the definition behind every supplied EV. Keep debt, leases, cash and investments consistent across peers, and label a rebuilt current-price EV separately from a provider value dated to an earlier quarter.
| Input or result | Manufacturer A | Manufacturer B |
|---|
| Price; current common shares | $50; 100 million | $50; 100 million |
| TTM profit available to common shareholders | 500 | 400 |
| Weighted-average basic / diluted shares | 100 / 110 million | 100 / 100 million |
| Diluted EPS | 500 / 110 = $4.5455 | 400 / 100 = $4.00 |
| Equity earnings yield | 4.5455 / 50 × 100 = 9.09% | 4 / 50 × 100 = 8.00% |
| Market capitalization | 50 × 100 = 5,000 | 50 × 100 = 5,000 |
| Debt; cash | 2,000; 500 | 0; 1,000 |
| EV = market cap + debt − cash | 5,000 + 2,000 − 500 = 6,500 | 5,000 + 0 − 1,000 = 4,000 |
| EBIT TTM | 800 | 600 |
| Enterprise earnings yield | 800 / 6,500 × 100 = 12.31% | 600 / 4,000 × 100 = 15.00% |
Dilution changes the per-share result
For A, basic EPS is 500 / 100 = $5, giving a 10.00% yield. Diluted EPS is $4.5455, giving 9.09%. The 0.91 percentage-point reduction reflects the assumed dilutive shares. This example assumes those shares need no numerator adjustment; convertible instruments can require adjustments to earnings as well as the share count.
- Use the reported diluted EPS reconciliation. Weighted-average shares measure participation during the earnings period; period-end shares measure a different date. Buybacks or issuance can make net income / current market capitalization differ from diluted EPS / price.
- Follow the reported dilution reconciliation rather than adding every potential share to a loss-period denominator. IAS 33 distinguishes dilutive effects and requires disclosure of instruments that could dilute future EPS but are excluded from the current calculation. Equal basic and diluted loss per share does not establish that future dilution is impossible.
- Keep split adjustments, share class and trading currency consistent. For an ADR, reconcile the depositary-share ratio before combining an ordinary-share EPS with the ADR price.
TTM ending date and publication date answer different questions
A trailing period describes when the company earned its profit. The publication date determines when a screen could have known it. In the fictional example, the June 30 TTM became available on August 10, so a July 31 historical screen cannot use it. A September 30 price paired with that TTM is a dated valuation snapshot, not a forecast for the next twelve months.
- The EPS arithmetic above assumes the same 110 million diluted weighted-average shares throughout. When share counts or dilution tests change, do not subtract annual and interim weighted-average shares to construct a TTM denominator. Reconcile reported EPS and provider TTM methodology.
- Record fiscal period end, filing or publication date, price timestamp, currency and accounting basis beside each row. Quarterly totals must cover four non-overlapping quarters; fiscal years can end in different months.
- TradingView distinguishes standardized diluted GAAP EPS from earnings-event reported EPS, which can follow an adjusted methodology. An earnings surprise value is not a substitute for the TTM EPS used in this screen.
| Bridge for A | USD millions | Purpose |
|---|
| Full-year 2025 profit | 460 | Starting annual total |
| Add January to June 2026 profit | +280 | Add the new half year |
| Subtract January to June 2025 profit | −240 | Remove the overlapping old half year |
| TTM July 2025 to June 2026 | 500 | 460 + 280 − 240 = 500 |
| Using stale annual profit instead | 460 / 110 / 50 × 100 = 8.36% | Different earnings period from the 9.09% TTM result |
A cycle peak can turn the cheapest-looking stock into a weak candidate
Suppose A generated its 500 profit on 5,000 of TTM revenue, a 10% net margin. A separate scenario using a 4% margin across the same revenue gives 200 profit, EPS of $1.8182 and an earnings yield of 3.64% at $50. The hypothetical base case passes an 8% cutoff; the normalized scenario fails. The lower margin is an assumption to investigate, not a prediction.
- Inspect several years spanning a business cycle. For companies whose scale changed, a historical average margin applied to current revenue can be more informative than averaging old dollar profits. Document acquisitions and accounting changes before using that history.
- Compare commodity prices, utilization, pricing and unusual gains with the period generating the TTM profit. Show reported and normalized calculations side by side instead of silently removing inconvenient earnings.
- If net income remains 500 but operating cash flow is 300 and capital expenditure is 250, simple FCF is 50. Against the 5,000 market cap, that is 1.00%, versus 9.09% diluted earnings yield. Review working capital and investment needs before interpreting the gap; this simple FCF convention is not unlevered FCFF / EV.
Keep losses and invalid denominators out of the positive-yield ranking
Use separate statuses for a loss, zero profit, missing data and an unusable denominator. Converting each to zero would erase the difference between a business at break-even and a company whose statements were unavailable.
- Treat financial companies separately: debt and interest are part of their operations, so an industrial-company EBIT / EV screen may be a poor comparison.
- A falling share price mechanically raises a positive earnings yield while earnings may be deteriorating. Review the latest filing and subsequent announcements before saving the candidate.
| Inputs | Arithmetic | Screen treatment |
|---|
| Diluted EPS −$1; price $50 | −2.00% | Loss-making; retain the sign and exclude from a positive-earnings screen. |
| Diluted EPS $0; price $50 | 0.00% | Break-even; P/E is undefined. |
| EPS missing or price ≤ $0 | Not usable | Do not infer zero earnings or divide by a nonpositive price. |
| EBIT 100; EV 0 | Undefined | Exclude from ordinary enterprise-yield ranking. |
| EBIT −100; EV −500 | +20.00% arithmetically | A positive quotient from two negatives does not demonstrate profitability. |
| EBIT 100; EV 1 | 10,000% | Inspect the near-zero denominator and cash restrictions before interpreting the result. |
Map the worksheet to Finance Agent and Market Screener
Pineify AI Finance Agent has tools for TTM income statements, balance sheets and enterprise values. Its stock discovery tool supports criteria such as sector, industry, exchange, market cap, price and volume. Earnings yield and EBIT / EV are not native filters in that discovery tool or in Market Screener. Use a bounded candidate list, retrieve the financial inputs, and review the calculations.
- Example Finance Agent request: For these five manufacturers, show the latest available TTM ending date and filing date, diluted EPS, price timestamp, EBIT, EV and the EV components. Calculate both yields, flag losses or missing values, and compare basic versus diluted EPS. Cite the filing for material adjustments.
- After checking the worksheet, add the supported symbols to a named Market Screener collection. Use the same daily timeframe for technical comparisons, then open each symbol on TradingView to inspect its chart and earnings events. Record rejection reasons and rerun the financial review after new results.
| Research step | Available tool or field | What still needs review |
|---|
| Define a comparable universe | Finance Agent stock discovery: sector, industry, exchange, market cap | Coverage and returned-list limits; the result is not an exhaustive yield ranking. |
| Rebuild the two yields | TTM income statement: diluted EPS, EBIT, net income, weighted-average shares and dates; enterprise values and balance sheets | Quote date, EV convention, publication availability and any missing fields. |
| Check normalized earnings | Historical financial statements and company disclosures | Cycle selection and adjustment assumptions are analyst judgments. |
| Save supported candidates for chart review | Market Screener collections: Close, Close / EMA 200, RSI 14, Relative Volume, ATR 14 % | Technical fields do not validate the financial assumptions. |
