What is EPS? | Earning per Share Explained | HDFC Securities
What is EPS? | Earning per Share Explained | HDFC Securities
Earnings per share (EPS) is a formula that indicates how well a company is doing financially. Financial analysts and investors often use EPS in the stock and trading industry to gauge a company's performance before making an investment decision. In simple terms, EPS is the portion of the company's net income allocated to its outstanding shares. It is calculated by dividing the company's net income (minus its preferred dividends) by the weighted average number of outstanding shares of its common stock.
However, simply judging a company based on a single EPS number is not advisable. If looking at a particular company, investors must consider both its historical and future EPS. Or, if comparing two or more companies, it's wise to compare the EPS of two companies functioning in the same industry. Typically, a higher EPS indicates higher profitability, and low EPS is a sign of low profitability. But that's not the end of it. It's essential to consider EPS in conjunction with other measures such as the company's share price to make a sound investment decision.
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