The Earnings Per Share (EPS) of a stock is a widely used metric for researching a business.
Understanding EPS could benefit you upon researching a stock.
So, what exactly is the EPS and how is it used?👇
Understanding EPS could benefit you upon researching a stock.
So, what exactly is the EPS and how is it used?👇
1/ What is the EPS?🎓
EPS is calculated as a company's profit divided by the outstanding shares
The resulting number is an indication of the company's profitability
EPS is calculated as a company's profit divided by the outstanding shares
The resulting number is an indication of the company's profitability
The higher the EPS, the more profitable a business is considered to be and a negative EPS suggests that the company is not profitable💸
Do not fear, all of this information about ratios can be found on:
· Business Financial Reports📰
· Yahoo Finance💼
· Moneyweb📚
· Google💻
Do not fear, all of this information about ratios can be found on:
· Business Financial Reports📰
· Yahoo Finance💼
· Moneyweb📚
· Google💻
2/ Example of EPS🔑
Company A has a net income of R7.6 billion.
It has 3.98 billion outstanding shares.
Company A, therefore, has a basic EPS of 1.91💻
Company A has a net income of R7.6 billion.
It has 3.98 billion outstanding shares.
Company A, therefore, has a basic EPS of 1.91💻
3/ How can the EPS be applied?
On top of determining how profitable a business is, EPS can be used to calculate the P/E ratio.
The P/E ratio offers insights into the price you're paying for a stock.
Investors compare EPS with the share price to determine the value of earnings.
On top of determining how profitable a business is, EPS can be used to calculate the P/E ratio.
The P/E ratio offers insights into the price you're paying for a stock.
Investors compare EPS with the share price to determine the value of earnings.
4/ EPS and Capital💼
An important aspect that is often ignored is how much capital is required to generate the earnings.
Two company's could have the same EPS, but one could do it with fewer assets.
That business would be more efficient at using capital.💪
An important aspect that is often ignored is how much capital is required to generate the earnings.
Two company's could have the same EPS, but one could do it with fewer assets.
That business would be more efficient at using capital.💪
5/ What is a good EPS?💪
A good EPS will be determined by recent performance, the competitors performance and analyst expectations.
The EPS could increase and the share price could decrease if analysts expected a higher EPS.
A good EPS will be determined by recent performance, the competitors performance and analyst expectations.
The EPS could increase and the share price could decrease if analysts expected a higher EPS.
The share price could also increase if the EPS of a business decreases.
This usually happens if the EPS doesn't decrease as much as analysts expected.✋
This usually happens if the EPS doesn't decrease as much as analysts expected.✋
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