Earnings per Share (EPS)

Net income provides information on the overall profitability of a company. Since most investors are not interested in buying the entire company, just a piece of it, it is useful for the company to present its earnings on a per share basis. An investor who owns 100 shares can then easily determine his or her share of earnings. While computing earnings per share would seem to be an easy task, there is more to it than meets the eye. For example, the number of shares outstanding can vary throughout the year as the company issues new shares or repurchases shares. Further, companies often issue stock options or other securities (for example, bonds) that are convertible into common stock. As a result, companies are required to report earnings per share on a basic and diluted basis under both U.S. standards and IAS.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis, Ratio Analysis, Valuation

See also:
  • Normalizing Price to Earnings Ratio for Business Cycle Effects
  • Adjusted Earnings Yield
  • What is basic earnings per share (EPS)?
  • Price Multiples
  • No-Growth Value Per Share
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    2 Responses to “Earnings per Share (EPS)”

    1. RIMM: Great Expectations put Research in Motion in Bleak House - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] preview, “Research in Motion (RIMM) reports on [Wednesday]. Consensus is calling for $0.99 EPS on $933 million in sales, and guidance of $1.04 on $994 million for next quarter. We’re taking [...]

    2. PLT: Plantronics Says Goodbye to Marketing Director - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] in net income, which in turn translates to $0.17 per share, or nearly 10 per cent of the total EPS generated. For FY2007 – get this – the company plans to increase marketing spend to $19 million. [...]

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