Earnings Per Share (EPS)
Earnings per share shows how much profit a company makes for each share on issue.
Quick reference:
Formula: Net profit ÷ number of shares. Unit: Cents per share. Used for: Calculating P/E ratio, dividends.
Higher EPS: more profit per share.
Expanded explanation:
EPS is a simple measure of profitability. It tells you how much of the company’s profit belong to each share. For example, if a company makes $100 million in profit and has 50 million shares, the EPS is $2.00
Investors watch EPS closely because rising EPS usually means the company is growing its profits. EPS is also used in other rations, like the P/E, and often influences how much dividend a company can afford to pay.
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