Earnings Per Share

Written: March 20, 2020 at 2:02 PM
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The Earnings Per Share (EPS) indicator is used in fundamental analysis of a stock. It's a simple division of the company's profit divided by the number of shares of its stock. A higher number indicates a more valuable company.

This simple number attempts to normalize the comparisons between companies, honing in on how much profit is allocated to one single share.

For example, look at these two theoretical companies:

Company 1

  • Profits = $1,000,000
  • Outstanding Shares = 6,535
  • EPS = $153.02

Company 2

  • Profits = $912,843,091,823
  • Outstanding Shares = 98,237,498,273
  • EPS = $9.29

Even though the two companies couldn't be more different, with Company 2 being stupidly large - it's Company 1 that is ~17x more profitable per share.

Citations

https://www.investopedia.com/terms/e/eps.asp Fundamental analysis

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