What is Earnings Per Share (EPS)?
The term earnings per share (EPS) represents the portion of a company's earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The figure can be calculated simply by dividing net income earned in a given reporting period (usually quarterly or annually) by the total number of shares outstanding during the same term. Because the number of shares outstanding can fluctuate, a weighted average is typically used.
How Does Earnings Per Share (EPS) Work?
Let's assume that during the fourth quarter, Company XYZ reportedof $4 million. During the same time frame, the company had a total of 10 million . In this particular case, the company's quarterly per share (or ) would be $0.40, calculated as follows:
$4 million / 10 million= $0.40
Why Does Earnings Per Share (EPS) Matter?
P/E ratio.is a carefully scrutinized metric that is often used as a barometer to gauge a company's profitability per unit of shareholder ownership. As such, per share is a key driver of share prices. It is also used as the denominator in the frequently cited
accounting changes and restatements. For that reason, free cash flow is seen by some to be a more reliable indicator than . Nevertheless, per share remains the industry standard in determining corporate profitability for shareholders.can be subdivided further according to the time period involved. Profitability can be assessed by prior (trailing) , recent (current) or projected future (forward) . Though earning per share is widely considered to be the most popular method of quantifying a firm's profitability, it's important to remember that themselves can often be susceptible to manipulation,
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
As an investor who loves to buy, hold and collect returns from my investments, I usually hate the idea of having to sell one of the stocks...Read More →
About six years ago, I bought a stock at $5 a share that I later sold for more than $30 per share. That's a 500% increase. Not bad, right? Well, it so...Read More →
Heads up: When you and your spouse fight about where to buy your next house, you're not really fighting about where to buy your next house. You're fighting about the ...Read More →
My cousin's a smart guy. When he was ready to upgrade to a different home, he didn't attend open houses or look in the classifieds. He didn't even ask a...Read More →