From Price Multiples to Yields: Completing Equity Valuation with PPP and SIRRIPA

Equity valuation continues to rely heavily on price multiples—most notably the Price–Earnings (P/E) ratio—despite their well-documented conceptual limitations. By compressing growth, discounting, and risk into static, non-invertible scalars, such metrics obscure the intertemporal structure of valuation, particularly in high-growth and low-interest-rate environments. Building on the time-explicit reformulation introduced by the Potential Payback Period (PPP), this paper advances a unified valuation framework that maps price into economic duration and subsequently into yield. It introduces SIRRIPA (Stock Internal Rate of Return Including Price Appreciation), a stock-equivalent yield derived over the endogenous PPP horizon and directly comparable to bond Yield to Maturity. Risk is treated structurally as an ex-post spread—the Structural Risk Premium—rather than as an assumed input to discounting. When equities are benchmarked against a common risk-free rate, differences in SIRRIPA fully capture differences in market-implied risk compensation, making SIRRIPA a sufficient measure for relative stock selection within a given market.