Calculate the portion of a company's profit allocation to each share of common stock. Earnings per share serve provide visability of a specific company's profitability.
|# of Shares Outstanding|
|Earnings per Share (EPS):|
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The earnings per share (EPS) is one of the most useful metrics in assessing a company's profitability. A company's profit divided by the outstanding shares of its common stock defines EPS. You can use the formula given below to calculate EPS:
The information required to calculate EPS can be fetched from a company's income statements and balance sheet.
Considering the design of the EPS Calculator at iCalculator, you must have the three key values to start using it and know your company's profitability, these are.
Based on the input, the calculator will provide you with the EPS figure after completing the calculation using the above-mentioned formula.
Earnings per share is a very important measure to assess a company's financial health. It is also a major component in calculating the price to earnings (PE) valuation ratio. Where, the E in PE refers to EPS. This ratio relates a company's share price to its earnings per share.
EPS is also useful when you are interested in trading in the share market. This is one of the many indicators you can use to pick a stock. Here, investors can compare EPS with the share price of a company to identify the value of earning as well as to predict future growth of a stock.
EPS is used to show how much money a company makes for each share of its stock. A higher EPS is an indicator of more value as it means the company is making profits. Investors will pay more for a company with higher profits. Let's take a look at some of the impacts of EPS.
Dividends are the portion of a company's profit that is distributed to its shareholders. Although, it is solely at the discretion of a company's management to distribute the dividends, these are calculated on the basis of EPS.
The valuation metric price to earnings ratio uses EPS as its main component. The basic calculations are done by dividing stock price by EPS. This is also an important measure to assess a company's profitability.
Despite the widespread use, the metric of EPS has some drawbacks when used as a primary measure of a company's performance. Let's take a look at those shortcomings:
Given the limitations of the EPS method, it is advisable that this method should not be used in isolation. Nonetheless, EPS is one of the most important ways to measure a company's profitability. Investors looking to buy stocks should take advantage of using this method and the EPS calculator.
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