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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  1. 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.

  2. 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?


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