Simple Valuation Methods

Earnings per Share

The earnings per share (EPS) calculation is used by investors to figure out how much money a company makes in earnings for every share. It is a figure that tells an investor how profitable a company is.  

To calculate the earnings per share figure, you simply need to divide the earnings of a company by the number of shares outstanding. So, if a company makes $500 and there are 500 shares, the EPS would be $1.

Whether an EPS figure is attractive or not, depends upon the share price of a company. For instance, an EPS of $1 would be great if the share price was $1, but it would be poor if the share price was $1000.

When using the EPS calculation, it’s important for investors to analyze trends over time. An attractive investment is one that has consistent EPS growth over time, as the firm is earning more and more per share.

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