#7 EPS (Earnings per share)

It is the profit retained by the company per share issued by it. By profit retained, we mean the amount of profit that is put back into business.

In some sense it is the money that a shareholder makes(though he does not recieve it) for every share that he holds.

Care should be taken to compare the EPS with that of previous year by removing 'ExtraOrdinary' income wherever it applies. Extraordinary Income is the income earned from non-business activities.

It is a figure that the companies publish in their Annual Report and with their quarterly results and we will never have to calculate it. Nonetheless it is very important to know how it is calculated and will become more and more clear as we move ahead.

The earnings per share could be quoted in many different forms and it is very important to understand what EPS is being quoted. There is a huge difference between the Forward and Trailing EPS. Also it is important in Fundamental Analysis that we know which EPS we are dealing with. There is another set of terms, consolidated and standalone EPS. We will deal this later.


Here is a link to a site where EPS is explained in greater details but I think that for the time being it is enough to know what I have written, otherwise you may get confused.