What is EPS?
EPS shows how much profit the company earned per share of stock. It's the bottom line profit divided among all shareholders.
Think of it like this
A lemonade stand with 10 partners (shares) makes $100 profit. Each partner's share is $10 (EPS). Next year profit is $150, so EPS grows to $15!
Formula
EPS = Net Income / Shares Outstanding- Net Income: Total profit after all expenses
- Shares Outstanding: Total shares in market
Why it matters
- Most important profitability metric
- Drives stock price over time
- Shows earnings growth trend
- Used to calculate P/E ratio
What's a good value?
Negative
Loss
Company losing money
$0-1
Low
Small profits per share
$1-5
Moderate
Decent profitability
$5-20
High
Strong earnings
> $20
Very High
Exceptional profitability
Real-world example
Apple EPS: $6 - highly profitable. Netflix EPS: $12 - strong earnings. Startup EPS: -$2 - still losing money. Berkshire Hathaway EPS: $20,000+ - few shares outstanding.
Things to watch out for
- Can be manipulated with buybacks
- One-time items distort EPS
- Compare growth rate, not absolute value
- Use diluted EPS for accuracy
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