Earnings Per Share

The Earnings Per Share ratio, or EPS, is a metric you can use to determine the profitability of a stock. While it certainly has its limitations, it can help shareholders understand how a company’s profit will affect their possible earnings. Notice that I said “possible” earnings. That’s because the EPS doesn’t represent REAL MONEY that is given out to shareholders. It is simply a visualization technique to get an idea of profits. Visualize this: A company takes all of its net profits and puts them into a big pile. Then, it divides up the pile of cash proportionally to all of its shareholders. That distribution illustrates how much the company is earning in profits for the benefit of its investors. …

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