EPSWhat are the indicators?EPSHow to use indicators?

EPSThis indicator is one that we will not miss in the process of fundamental analysis. But when I wrote the official account recently, I found that many friends didn't understand what it wasEPSIn fact, when translated into Chinese, everyone will understand that it is also called earnings per share. Today, Lin Long will give a science popularization lecture and chat with everyoneEPSThe function.

Let's talk firstEPSThe calculation method is actually very simple, which is to divide the after tax profit by the total share capitalEPS。EPSRepresents the net profit or net loss that shareholders of a listed company can enjoy or bear for each share they hold.EPSUsually used by us to measure a company's profitability and investment risk. It is also one of the indicators for us to evaluate the profitability of enterprises, predict their growth potential, and judge whether the fundamentals of individual stocks are good on a daily basis.


The role of earnings per share


Firstly, this ratio most intuitively reflects the profit value created per share. The higher this ratio, the more profit is created. When calculating, we need to pay attention to one thing. If the company only has ordinary stocks, then net income is the after tax net profit, and the total number of shares is the number of outstanding shares. If there are preferred shares, it should be noted that dividends distributed to preferred shareholders should be deducted from the after tax net profit first.


When using this indicator for analysis, we can compare companies and evaluate the relative profitability of two companies through this indicator. It can also be compared at different time periods within the same company to understand changes in the company's profitability. And through this change, we can also know whether the company's development is good or bad, as well as the management ability of the company's management.


Lin Long reminds us to pay attention to the following issues when calculating:


If the company has prepared consolidated financial statements, then we should calculate this indicator based on the data in the statements. If there are non convertible preferred stocks, then this portion of the stock quantity and corresponding dividends should also be removed. Deducting a portion of net profit is usually referred to as earnings, so earnings per share after deducting preferred stock dividends are also called earnings per share.


Some companies have very complex internal equity structures, with non convertible preferred shares in addition to common shares. If there are only these, then it's not enough. There are also complex options such as convertible preferred stocks, convertible bonds, stock warrants, etc. This involves the concept of 'dilution'. Convertible bonds can be converted into common stocks, thereby increasing the number of common stocks. There are also stock purchase warrants that allow for the purchase of common stock at a predetermined price, which can also increase the company's common stock. If these are also included in the statistics, it is called diluted earnings per share.