Live data
AAPL — EPS, P/E Ratio. Open AAPL on the Ledge to see current values.
Formula
Accretive if: Target EPS Contribution > Financing Cost per Share
Key point
A deal is accretive simply because a higher-P/E buyer acquires a lower-P/E target — this is arithmetic, not value creation. Accretion analysis is necessary but not sufficient for evaluating a deal.
Try it
If a company with a 25x P/E acquires one with 12x P/E, the deal is almost certainly accretive. But ask: did they overpay? Is the target’s lower P/E justified by slower growth or higher risk?
Check-in
A deal is 15% accretive to EPS in Year 1. Does this mean the acquirer’s stock should rise 15%?
Key insight
Check-in
Company A (P/E 25) acquires Company B (P/E 15) with 100% stock. Before deal: A's EPS $4, B's EPS $2. Post-deal share count rises 30%. Is the deal accretive or dilutive to A's EPS?
Check your understanding
Sit with the ideas.
Buyer has P/E of 25x (earnings yield 4%). They acquire a target with P/E of 10x (earnings yield 10%) using all debt at 5% interest. Is the deal accretive or dilutive?
Why: