(v6125.00) Earnings Per Share

Traditional accounting measure of corporate performance for companies with a simple capital structure that reflects the net income available for each common share. The ratio is calculated as follows:

Income Available for Common Shareholders (v1850.00)
No. of Common Shares: Wtd. Average (v3410.00)

EPS growth does not necessarily lead to shareholder returns, even over longer periods of time. EPS growth can be achieved not only when management is investing at or above the market discount rate (cost of capital), but also when it is investing below the discount rate and thereby decreasing the value of the stock. A high EPS (v6125.00) ratio does not necessarily imply that the company has a positive cash flow and an ability to pay a high proportion of these earnings in dividends.

The accounting dividend payout ratio, or proportion of earnings that are distributed, can be calculated by dividing Dividends per Share (v6140) by Earnings Per Share (v6125.00). EPS (v6125.00) also is used to calculate the Price/Earnings (v5130) ratio, by dividing the Stock Price (v5.00.200) by EPS (v6125.00). A high Price/Earnings ratio may indicate these investor beliefs:

  1. They expect high dividend growth

  2. They view the stock as low risk and therefore are satisfied with low returns

  3. They expect average company growth but a high payout ratio