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Anna Williams

EPS

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Posted (edited)

Hi Anna, and thanks for coming here.

Earnings per share (EPS) is arguably the most basic model to put a value on stock due to its simplicity. It is calculated by dividing the company's profit with the number of outstanding shares of its common stock. 

The formula to calculate EPS is as follows: 

Earnings per Share= End-of-Period Common Shares Outstanding/Net Income − Preferred Dividends

What the EPS actually shows is how many dollars are earned by each share. As such, it is a valuation method focused on profitability since the higher EPS increases the value of the company and ultimately the price for new investors.


 

Edited by Criss Edward

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