100 Days Learning Series📈
DAY 14: Earning Per Share (EPS)
#100_Days_Learning_Series
DAY 14: Earning Per Share (EPS)
#100_Days_Learning_Series
1⃣ Introduction to Earnings Per Share (EPS):
🔸EPS is a key financial metric indicating a company’s profitability per share.
🔸It helps investors assess financial health and performance.
🔸EPS is a key financial metric indicating a company’s profitability per share.
🔸It helps investors assess financial health and performance.
2⃣Importance of EPS:
🔸Provides direct insight into a company’s profitability.
🔸Higher EPS suggests better profitability and potential for higher stock prices.
🔸Provides direct insight into a company’s profitability.
🔸Higher EPS suggests better profitability and potential for higher stock prices.
3⃣ Calculating EPS:
🔸Formula:
EPS = (Net Profit−Dividends on Preferred Stock)/
Average Outstanding Shares
🔸Key components:
👉Net Profit: Total profit after expenses and taxes.
👉Dividends on Preferred Stock: Payments to preferred shareholders.
👉Average Outstanding Shares: Weighted average number of shares during the period.
🔸Formula:
EPS = (Net Profit−Dividends on Preferred Stock)/
Average Outstanding Shares
🔸Key components:
👉Net Profit: Total profit after expenses and taxes.
👉Dividends on Preferred Stock: Payments to preferred shareholders.
👉Average Outstanding Shares: Weighted average number of shares during the period.
4⃣ Types of EPS:
🔸Basic EPS: Considers only common shares outstanding.
🔸Diluted EPS: Includes potential shares from convertible securities (options, warrants, bonds).
🔸Basic EPS: Considers only common shares outstanding.
🔸Diluted EPS: Includes potential shares from convertible securities (options, warrants, bonds).
5⃣ Examples of EPS Calculation:
👉Company: X Ltd
👉Financial Data:
- Net Profit: ₹60,705 crore
- Average Outstanding Shares: 644 crore
🔸Basic EPS Calculation:
👉Basic EPS=₹60,705 CR /644 CR shares
=₹94.23 per share
🔸Diluted EPS Calculation:
- Convertible Securities: 10 crore stock options and convertible bonds.
- Total Potential Shares: 654 crore
👉Diluted EPS=₹60,705 CR/ 654 CR shares(644+10)
=₹92.83 per share
👉Company: X Ltd
👉Financial Data:
- Net Profit: ₹60,705 crore
- Average Outstanding Shares: 644 crore
🔸Basic EPS Calculation:
👉Basic EPS=₹60,705 CR /644 CR shares
=₹94.23 per share
🔸Diluted EPS Calculation:
- Convertible Securities: 10 crore stock options and convertible bonds.
- Total Potential Shares: 654 crore
👉Diluted EPS=₹60,705 CR/ 654 CR shares(644+10)
=₹92.83 per share
6⃣ EPS Growth and Its Importance:
🔸Tracking EPS growth over time shows profitability trends.
🔸Consistent EPS growth indicates efficient resource management and potential for future gains.
🔸Tracking EPS growth over time shows profitability trends.
🔸Consistent EPS growth indicates efficient resource management and potential for future gains.
7⃣ Comparing EPS Across Companies:
🔸EPS allows for profitability comparison regardless of company size.
🔸Example: Comparing EPS of Reliance Industries with Tata Motors.
🔸EPS allows for profitability comparison regardless of company size.
🔸Example: Comparing EPS of Reliance Industries with Tata Motors.
8⃣ EPS in Investment Decisions:
🔸Profitability Indicator: Higher EPS usually indicates better profitability.
🔸Investment Quality: Strong and growing EPS reflects financial health.
🔸Valuation Metric: Used in ratios like Price-to-Earnings (P/E) to assess stock value.
🔸Profitability Indicator: Higher EPS usually indicates better profitability.
🔸Investment Quality: Strong and growing EPS reflects financial health.
🔸Valuation Metric: Used in ratios like Price-to-Earnings (P/E) to assess stock value.
9⃣ Limitations of EPS:
🔸Debt Exclusion: Does not account for company debt.
🔸Accounting Policies: Variations in accounting can affect EPS.
🔸Potential Manipulation: Companies might adjust practices to inflate EPS (e.g., share buybacks).
🔸Debt Exclusion: Does not account for company debt.
🔸Accounting Policies: Variations in accounting can affect EPS.
🔸Potential Manipulation: Companies might adjust practices to inflate EPS (e.g., share buybacks).
🔟Conclusion:
🔸EPS is essential for understanding a company’s per-share profitability.
🔸Analyzing and comparing EPS helps investors make informed decisions.
🔸Despite limitations, EPS remains a vital financial analysis tool.
🔸EPS is essential for understanding a company’s per-share profitability.
🔸Analyzing and comparing EPS helps investors make informed decisions.
🔸Despite limitations, EPS remains a vital financial analysis tool.
That's a wrap!
I hope you found this compilation helpful!
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Radhe Radhe 😍
I hope you found this compilation helpful!
Want to stay connected?
Join my Telegram Channel for more insights: telegram.me 📲
Radhe Radhe 😍
You can Find Previous Learning Tweets here:
DAY 1: Indian VIX
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DAY 2: PEG Ratio
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DAY 3: Engulfing Candlestick
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DAY 4: Shooting Star Candlestick
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DAY 5: Hammer Candlestick
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DAY 6: Most Useful Stock Market Apps/Websites
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DAY 7: PE Ratio
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DAY 8: Peter Lynch Investing Screener
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DAY 9: Market Capitalization (Market Cap)
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DAY 10: Debt-To-Equity Ratio
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DAY 11: The Greatest Investors of All Time (MUST READ🚨)
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DAY 12: Dividend Yield
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DAY 13: Fiscal Defecit
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Radhe Radhe 🌴
DAY 1: Indian VIX
x.com
DAY 2: PEG Ratio
x.com
DAY 3: Engulfing Candlestick
x.com
DAY 4: Shooting Star Candlestick
x.com
DAY 5: Hammer Candlestick
x.com
DAY 6: Most Useful Stock Market Apps/Websites
x.com
DAY 7: PE Ratio
x.com
DAY 8: Peter Lynch Investing Screener
x.com
DAY 9: Market Capitalization (Market Cap)
x.com
DAY 10: Debt-To-Equity Ratio
x.com
DAY 11: The Greatest Investors of All Time (MUST READ🚨)
x.com
DAY 12: Dividend Yield
x.com
DAY 13: Fiscal Defecit
x.com
Radhe Radhe 🌴
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