Earnings per share, or EPS, is a way to measure the financial success of a company by utilizing their number of outstanding shares and their net income. It is a metric that is often used to analyze stock tickers and plays a role in the major financial markets.
When you are calculating earnings per share you need to have the value of three variables:
When you calculate EPS you will get a dollar amount back. This is the only result and you will have to apply it correctly to your use-cases to make the most of it. As we know, EPS is a measure of how much income a company has earned per common share. If a company is doing very well, it will have an EPS that is higher rather than lower. EPS can be negative as well, this can be a clear sign that a company is not doing well and should not be invested in.
NOTE: The EPS for a company is ever-changing, you should almost always get a new earnings per share value each quarter. It is normal and expected, it would be more odd if a company always got the same EPS. This is due to ever-changing company performance, seasonality, and many other factors that can impact a business' performance.
Figuring out the EPS of a company is typically not something you have to do, but if you need to calculate it you can use our simple tool. The steps to use this tool include:
You are an eager investor, we all want to make sure we choose the right company to make the most of our money. You read their latest earnings report and notice they left out their EPS so you have to calculate it by yourself using this tool. After reading their official documents, you find they have a net income of $5.7 million, paid out a total of $1.1 million in dividends, and have a total of 24 million outstanding common shares.
After plugging these numbers in our tool, you will get an EPS of $0.19! The formula with these values would look like this:
EPS tells you the amount of money each common share of a company makes. If you have an EPS of $1.50, each share is essentially attributed to $1.50 in profit for the company.
There is no single good EPS for all stocks, this varies by industry, company age, and other factors. But it is believed that some of the best stocks have an EPS of about 75 or more.
You want an EPS as high as possible, this means it generates more money per share than not.
If EPS is too high it may drive the price up of the stock price and make it a more expensive investment which inherently adds more risk to the purchase.
Yes, EPS can be negative. If you find a company with a negative EPS it means it is losing more money than it is generating and should be generally considered as a very risky investment opportunity.
Create Date: September 30, 2024
Last Modified Date: October 8, 2024
