Earnings per Share - EPS
Earning per share stands - EPS, stands for company's total earnings divided by the total number of shares outstanding.
It is the most important variable used by investor when determining share's price, and is calculated by the following formula:
EPS = Net Income - Dividends on preferred stocks / Average Outstanding Shares
Note that companies are using weighted average number of shares outstanding over the reporting term, rather than actual number, because the number of shares changes over time.
The higher EPS is the better. Earnings per share can be a great indicator when comparing two companies in the same industry.
EPS can be calculated for the previous, current and for the upcoming year.
- Trailing EPS - last year's calculation, and the only actual EPS
- Current EPS - this year's calculation, which is still just a projection
- Forward EPS - future calculation, which are obviously projections
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