Howdy Wall Street Willy. In the newspaper, I read something about EPS. But what is EPS anyway?
EPS stands for Earnings Per Share.
EPS is the profit, or earnings, of the company for one year, divided by the number of stocks that the company has.
Earnings Per Share or EPS = Earnings of the Company for a Year / No. of Stocks of the Company
Well, what does that mean?
As you know, the ownership in a company is defined by stocks. EPS is the amount of the company’s earnings assigned to each stock.
Well, could you give me an example?
If a company has 100 stocks, and has made a profit of $50 in the year, the EPS is $50 (its earnings), divided by 100 (the number of stocks it has). So the EPS for that company will be 50 cents per share.
Earnings Per Share or EPS = $50 / 100 = $0.50
So if you own 5 stocks in the company, your share would be 5 times 50 cents, or $2.50.
Your Share =5 X $0.50 = $2.50
So if I own one stock of the company, do I get an amount equal to the EPS every year?
No, EPS is what each share earns. However, it is not what you get as a stockholder. You only get a portion of the EPS. The remaining is usually reinvested by the company to improve its operations – like for buildings and factories.
The portion you get as a stockholder is called a dividend. But that’s a topic for another time.
Thank you very much for telling me about EPS, Wall Street Willy.
You’re welcome, Sooper Cooper. Remember, finance is your friend!
Podcast: What is EPS (Earnings Per Share)?
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
All you need to know about EPS or Earnings Per Share: What is EPS, example of EPS, calculation of EPS, how much money you get in your hands if you own stock in a company (EPS vs dividend), and more.
Show notes and transcript at: https://easypeasyfinance.com/what-is-eps-earnings-per-share/
