With the stocks earning metrics. What does eps mean.


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Earnings per share (EPS) is a key financial metric that represents the portion of a company's profit allocated to each outstanding share of common stock. It is calculated by dividing the company's net income by the total number of outstanding shares12.
Here's a breakdown of what EPS means and how it's calculated:
- Understanding EPS: EPS is a measure of a company's profitability, indicating how much profit each outstanding share of common stock has earned12.
- Calculation of EPS: To calculate EPS, you need the company's net income (also known as profits or earnings) and the number of outstanding shares. The formula is: EPS = Net Income − Preferred Dividends / End-of-Period Common Shares Outstanding1. It's important to use the weighted average number of common shares over the reporting term because the number of shares can change over time due to stock buybacks, splits, or new issuances12.
- Interpreting EPS: A higher EPS indicates that a company is more profitable per share, which can make the stock more attractive to investors13. Companies often use EPS to compare their profitability with others in the same industry, and investors use it to estimate the value of a company's stock4.
- Diluted EPS: Diluted EPS takes into account the potential dilution from convertible securities, employee stock options, and secondary offerings. It provides a more conservative estimate of EPS by assuming the issuance of stock for all outstanding options, warrants, and convertible securities25.
In summary, EPS is a crucial indicator of a company's profitability, helping investors assess the value of an investment and the company's ability to generate earnings per share of common stock.
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