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Earnings Yield (EBIT/EV)

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Earnings Yield

3.2%

Stock price: $333.69

Low earnings yield

This model compares operating profit (EBIT) with Enterprise Value to measure how much annual operating earnings the business generates relative to its market valuation.

Historical Earnings Yield (EBIT/EV)

Historical EBIT divided by Enterprise Value, using each year's share count, debt, cash, and representative stock price.

0%3%6%9%12%2016: 10.6% earnings yield10.6%20162017: 7.7% earnings yield7.7%20172018: 9.9% earnings yield9.9%20182019: 5.4% earnings yield5.4%20192020: 3.1% earnings yield3.1%20202021: 3.8% earnings yield3.8%20212022: 5.6% earnings yield5.6%20222023: 3.8% earnings yield3.8%20232024: 3.2% earnings yield3.2%20242025: 3.3% earnings yield3.3%2025

Notes

⚠️ A low earnings yield means investors are paying a relatively high Enterprise Value for each dollar of operating profit.

Key Valuation Metrics

What is Earnings Yield?

Earnings Yield measures how much operating earnings a company generates relative to its Enterprise Value. It is calculated as EBIT divided by Enterprise Value and is the inverse of the EV/EBIT multiple.

Unlike intrinsic valuation models, Earnings Yield does not estimate a fair value. Instead, it measures current operating earnings relative to the price investors are paying for the business.

Generally, a higher Earnings Yield indicates a lower valuation relative to operating earnings, while a lower Earnings Yield indicates a higher valuation.

Earnings Yield Formula

Earnings Yield=EBITEnterprise Value=1EV/EBIT \text{Earnings Yield} = \frac{ \text{EBIT} }{ \text{Enterprise Value} } = \frac{1}{ \text{EV/EBIT} }
Enterprise Value=Market Capitalization+Net Debt \text{Enterprise Value} = \text{Market Capitalization} + \text{Net Debt}
Net Debt=Total Debt−Cash & Short-Term Investments \text{Net Debt} = \text{Total Debt} - \text{Cash \& Short-Term Investments}

How Earnings Yield Works

The Earnings Yield model measures how much operating earnings the business generates relative to Enterprise Value. It first calculates Enterprise Value, compares it with EBIT, then converts the EV/EBIT multiple into an earnings-yield percentage.

Market Cap & Net Debt
→
Calculate Enterprise Value
→
Compare EV to EBIT
→
Calculate EV/EBIT
→
Invert into Earnings Yield
→
Assess Yield Quality

Key Model Assumptions

• EBIT is used as the measure of operating earnings.
• Current EBIT is based on trailing twelve-month (TTM) operating results when four consecutive quarterly periods are available; otherwise, the latest annual EBIT is used.
• Enterprise Value is calculated by adjusting Market Capitalization for Net Debt or Net Cash.
• Earnings Yield measures current operating earnings relative to Enterprise Value and does not estimate intrinsic value.
• A higher Earnings Yield generally indicates a lower valuation relative to operating earnings, while a lower Earnings Yield indicates a higher valuation.
• The model assumes current EBIT is representative of the company's normalized operating performance.
• Earnings Yield is the inverse of the EV/EBIT multiple, so both measures contain the same valuation information.

Step 1 — Calculate Enterprise Value

Enterprise Value = Market Cap + Net Debt
Net Debt = Total Debt − Cash & Short-Term Investments
= $84.3B - $62.4B = $21.9B

Enterprise Value:
$4901.0B + $21.9B = $4923.0B

The model begins by calculating Apple's Enterprise Value, which measures the total value of the operating business. Market Capitalization is adjusted for Net Debt or Net Cash to determine Enterprise Value, making it the appropriate value to compare with EBIT. Under the current assumptions, Enterprise Value is $4923.0B.

Step 2 — Calculate EV/EBIT

EV/EBIT = Enterprise Value / EBIT
= $4923.0B / $155.9B = 31.6x

The model compares Apple's Enterprise Value with its operating earnings by calculating the EV/EBIT multiple. This shows how much investors are paying for each dollar of EBIT. Under the current assumptions, Apple trades at 31.6× EBIT.

Step 3 — Convert EV/EBIT into Earnings Yield

Earnings Yield = EBIT / Enterprise Value
Earnings Yield = $155.9B / $4923.0B = 3.2%
Earnings Yield = 1 / (EV/EBIT)
Earnings Yield = 1 / 31.6 = 3.2%

The final step expresses the EV/EBIT multiple as an Earnings Yield. Dividing EBIT by Enterprise Value measures annual operating earnings relative to the value of the operating business. Because Earnings Yield is the inverse of EV/EBIT, both measures describe the same valuation from different perspectives. Under the current assumptions, Apple has an Earnings Yield of 3.2%.