Earnings Per Share Basics
Earnings per share (EPS) measures a company's profitability. It's calculated by dividing the company's net income by its total number of outstanding shares.
Variations of EPS
There are different types of EPS: Basic EPS, Diluted EPS, and Adjusted EPS. Each provides insights into financial health, considering stock options, warrants, and convertibles.
Importance of EPS
EPS is vital for investors. It helps gauge a company's performance, influencing stock prices. Higher EPS often implies greater value and better performance.
EPS and Dividend Policy
Dividend policies may affect EPS. Companies retaining earnings likely see EPS growth, assuming increased profitability. Those distributing dividends might report lower EPS growth.
Pitfalls in EPS Analysis
EPS doesn't account for capital structure. Two companies with identical EPS can have different debt levels, affecting their financial health and sustainability.EPS's Hidden History
The concept of EPS dates back to 1924, when John Moody, founder of Moody's, first introduced it in his financial reports.
What does EPS measure?
Company's share performance
Total outstanding shares
Company's profitability
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