Earnings Per Share ( EPS )

Investment Formula Description

Earnings Per Share ( EPS ) is the indicator that shows how much a share earns in a financial period. The unit measurement that uses in Earnings Per Share ( EPS ) is either cents or dollars.It shows the investors how many cents or dollars that each share earns in a financial period so that the investors can compare with previous financial period or even compare with other competitors.Obviously, for Earnings Per Share ( EPS ), if the value is higher , it is better since it shows that the corporation earns more in that financial period. Commonly, Earnings Per share ( EPS ) will use together with Price Earnings Ratio ( PER ).

Investment Formula

Earnings Per Share ( EPS ) = Net Profit / Total Share

Investment Formula Example

If Corporation A has total $100,000 of net profit for financial year 2008 and its total share for that financial year is 100,000 share.
Earnings Per Share ( EPS ) = Net Profit / Total Share = 100,000 /100,000=1.
In this case, this corporation has 100 cents or $1 earnings per share ( EPS ) for this financial year.

Besides, the investor can calculate their earnings from the shares they owned. For instance, if the investor owns 1000 share for Corporation A.

Total Share Earning = Total Share Owned by the Investor X Earnings Per Share ( EPS ) = 1000 X $1 = $1000.

It means that the total earning of Investor for Corporation A is $1000 but it doesn't means that the investor will get $1000 in cash because it will depend on dividend declared by the Corporation. Generally, corporation will declare dividend less than the Earnings Per Share (EPS) as the corporation will reserve some earning for corporation growth.