What financial ratio is the inverse of the price-to-earnings ratio?

The financial ratio that is the inverse of the price-to-earnings ratio is earnings yield.

The price-to-earnings, or P/E, ratio compares a company’s share price with its earnings per share. Earnings yield reverses that relationship: it divides earnings per share by share price, or E/P. Because it expresses earnings relative to the price paid, it is normally quoted as a percentage rather than as a multiple.

For example, a share with a P/E ratio of 20 has an earnings yield of 5%, because 1 divided by 20 equals 0.05. This makes earnings yield useful for comparing equity valuations with bond yields or other percentage-based returns.

The measure is not the same as dividend yield. Dividend yield reflects cash dividends paid to shareholders, while earnings yield includes the company’s total reported earnings, including profits retained in the business. Analysts may also use adjusted versions based on measures such as enterprise value, debt, cash, capital expenditure, or operating earnings, so the formula should always be checked in context.