Everything About Earnings Per Share EPS

What is EPS?

EPS is a financial metric that indicates how much profit a company makes for each share of its stock.

To calculate EPS, we must divide the company’s net income by the total number of outstanding shares.

For example, let us assume that company XYZ’s net income is 100,000 and its outstanding shares are 100. Then its EPS is 100,000 / 100 = 1000 per share.

This does not in any way mean that everyone holding its share is making Rs. 1000/- profit per share but it means that the company is earning 1000 per share.

EPS gives a good indication of the financial health of the company but it still does not indicate the future growth of the company.

EPS indicates how much profitable a company is and how much each shareholder would receive if all the net income were distributed as profits. However net income is never distributed as profits but dividends are given on income made.

It is out of the scope of this post to discuss how dividends are calculated. I will post some other day.

Other than the options course I also have a course where I teach how to select stocks to invest for the short term 5-6 months for good returns. Let me know if you are interested.

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