In this video, we will talk about Earnings Per Share, how it is calculated and how it is used in valuations to understand the potential of a business.

Chapters
00:00 Introduction
01:01 What is Earnings Per Share?
02:23 EPS Calculation
03:40 EPS Calculation with Preferred Dividends
05:20 Trailing, Current and Forward EPS
06:16 Using EPS in Valuation PE Ratio

What is EPS?
EPS is defined as the ratio of net income to the total number of ordinary shares issued by the company. It is a number that helps investors figure out if the company is worth investing in or not.

There are three types of EPS: Trailing EPS, Current EPS, and Forward EPS.
EPS is used to calculate the PE ratio, which is the Stock Price/Earnings Per Share. There are two types of EPS: Basic and Diluted.

Formula for EPS = (Net Income – Preferred Dividends) / Number of Common Shares

Importance of EPS
An important metric for investment analysis
Also used in ratio analysis for comparable periods

Limitations of EPS
Misrepresented while pursuing buyback of shares
Chances of manipulation
Doesn’t broadly account for financial leverage

#earningpershare, #wallstreetmojo, #EPS

For more details, you can refer to our article at - https://www.wallstreetmojo.com/earnin...


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