Investment Must-Read | In-Depth Understanding of EPS and Its Practical Application in Stock Selection

2025-12-25 01:11:47

Why Are Investors Watching EPS?

When it comes to stock investing, many people hear the term “EPS.” This simple three-letter abbreviation is the most straightforward tool for assessing a company’s profitability. In simple terms, EPS (Earnings Per Share) refers to the profit attributable to each share of a company’s stock.

Imagine you buy shares of a company; essentially, you’re buying the company’s future profit-generating ability. EPS is an important indicator to measure this ability. The higher the company’s EPS, the more profit each share represents, indicating stronger profitability.

For investors, this metric helps determine: Is the company earning more profit? How does this company’s profitability compare to its industry competitors? This is why institutional investors and retail investors alike consider EPS a core reference indicator.

Understanding What EPS Is — A Detailed Explanation

The full English name of EPS is Earnings Per Share, which literally translates to “profit per share.” It consists of three elements:

Earnings — the company’s net profit, the result after deducting all expenses from revenue
Per Share — averaged across each common share
Common Shares — all issued and publicly traded ordinary stocks of the company

Therefore, a higher EPS indicates that the company is generating more profit per share. For example, looking at Apple’s financial data from 2019 to 2024, as the company’s scale and profitability increased, its EPS also showed a steady upward trend.

What Is EPS? The Calculation Method Is Not Complicated at All

Standard calculation formula

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.