EPS: What is Earning Per Share and How to Analyze it?

Eps

What is EPS?

Most people call it EPS. It will tell you how much profit will be on each share of the company if the profits are divided. Therefore formula of Earning Per Share becomes

EPS= Net Profit ÷ Total No. of Shares

For example, if one assumes that a company has earned 1 crore in the net profit of 1 crore and if there are 1 lakh shares of this company then 100 shares will be from each share when the entire profit has been allocated. Usually, the company does not share all of its profits with its shareholders. Some give in the form of small dividends and reinstate the rest of the company to grow so that more net profit can be earned in the future.

Those investors who want to get regular income from dividends, they know from EPS that the company can give more dividend. For example, if a company gives 10 or 12 dividends in 1 year, investors can know from EPS and how much dividend it can get.

More Earning Per Share means more profits. So, a company whose EPS is more likely to invest in such a company would like to invest. Remind you, as we select the mutual funds after evaluating many parameters in mutual funds, in the same way, in this case, you should also analyze and then invest in many parameters.

How to Analyz EPS?

eps

Nowadays, you get the EPS in readymade. So it is not necessary to calculate, but it needs to be correctly analyzed. When you search the name of a share on MonyConcrol, you get an EPS option in the consolidated section.

But if you want to know just one or two year’s EPS, then there is no benefit to it. You must know at least 5 to 6 years of earning per share for any company. If you want to know the last 5 or 6 years of a company’s Earning Per Share, you will need to type the name of the company by visiting the MonyControl website. And then click on the Ratio in the section of the financial. There will not be many financial resources but some financial resources will be available there.

If the company has an Earning Per Share, then it is worthwhile. If the Earning Per Share of a company is growing for the last 5 or 10 years then it is a good signal for the company. When you do fundamental analysis, it does not work just by checking one or two ratios.

Earning Per Share of a stock is good and constantly growing and if you buy shares by thinking of this, then it is not good for you. Earning Per Share is a small part of fundamental analysis. So while doing Fundamental Analysis you have to check a lot of things and EPS is from them.

That’s why any company does not work just by watching the Earning Per Share. If any company’s EPS is growing steadily, then this is a good thing for the company. But it is very important for you to know why Earning Per Share increases?

Also, read: 3 Best & Powerful Stock Market Books For Beginners

Why EPS increases for any Company?

What are the changes made by the company in its business, which company’s product is doing well, which is leading the company’s profits and Earning Per Share? You have to know about all such things. To understand all these things, you have to understand the company’s business well and focus on small things too.

Many times the company takes a lot of loans and by putting all those money in their business, it increases their earnings and EPS. If a company is taking loans within its limits, then it is fine. But if a company is taking more than the loan, then if such company is growing even if the Earning Per Share is growing then it can prove to be fatal for the company and investor.

 

 

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About the Author: Manoj

My name is Manoj Prasad and I am the founder of this website(Trendinwealth.com). I always love to learn new things through different sources and whenever I get time, I shared those new things with my friends, family and with you.

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