Earnings per share (EPS) is calculated by taking the net earnings of the company, then dividing by the number of shares of the company. Once you’ve determined this number, you can then use it to conduct a Margin of Safety Analysis and a Payback Time Analysis. In this video, I discuss why earnings per share is an important metric to know in order to invest in a company, but not the ONLY number you need to know to make a smart investment decision.
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EPs is an estimate. Companies can go broke with good eps
Check cash flow and eps
Years ago I designed my own stock research analysis worksheet and I use the following
equation to check the growth rate of a company and its profit rate.
Earned Growth Rate:
Earned Growth Rate = (Earning per shares – Dividend) – Book Value
Comment: The
EGR is the annual rate at which the company’s equity capital per common share
is increased by net earnings after payment of the dividend. It is a reliable
measure of investment growth because it shows the growth of the capital
invested in the business.
Profit Rate:
Profit Rate = Profit per common shares – Book Value
Note: I have enclosed with
this educational manual is my copyrighted analysis sheet that I use in
analyzing the company I have a desire in buying stocks in.
Thanks!
helpful
Thank You
Thank you Phil
I use it for my capstone class to help with understanding real-world earnings per share
Great video
Great Video! Can you tell me if dilution could cause EPS to drop drastically? Let's say I want to know if a company dilutes shares but I'm proficient with time and see a stable or increase in EPS for long term. Could I skip going into SEC filings looking for dilution issues?