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Earnings Per Share



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Earnings Per Share or EPS is an important financial number in Fundamental Analysis of a company.

It tells us how much portion of a company's profit is allocated to each outstanding share of common stock.

It speaks about the profitability of the company.

The EPS is as simple calculation. It can be obtained by dividing (Net Income - Dividend on Preferred Stock) with Average Outstanding Shares.

Okay. This might be confusing to some investors.

The best place to get EPS data is the Financial Results Statement (Profit & Loss Statement) that your company gives you or shares with the stock exchanges or other regulators.

The EPS is a calculation that is already done and reported in the statement.

So, in most cases, you need not have to compute it yourselves.

An increase in EPS is often an indication of improved performance of the company.

There is no specific number as to how much EPS should be.

As you can make out from the EPS calculation formula, it will be more (or less) depending on the outstanding shares.

Example

Assume that the EPS of a company XYZ is 13.75 as of year ending March 31, 2016.

Assume that the EPS rose to 16.95 as of year ending March 31, 2017.

Clearly, there is an improvement from 13.75 to 16.95

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