Earnings Per Share

Fundamental analysis of a certain company can be measured by many available tools including the company's earnings per share. EPS can be very helpful especially on looking at a glance of the corporation's health and status. EPS interpretation requires in depth knowledge on how a trader could use this to his advantage.

The earnings per share is the most basic measurement of a company and tells how much the company in question's share value has gone up or down over a specified period of time. While it may not seem like an important factor, the length of time is essential so that a correct view can be taken of the company. Amounts of outstanding shares may vary from day to day, making it necessary to either take an average or a snapshot of sorts regarding the company's fiscal length. The EPS can also give traders an idea ofhow quickly the company's stock has increased or decreased over a period of time. EPS is calculated with the following equation:

EPS = (net income - dividends on preferred stock) / (number of outstanding shares)